Half of LPs plan to be active in secondaries this year

Although the secondaries market provides a much needed liquidity source to the private equity industry, GPs and LPs agree it’s still not enough, according to a new SEI survey.

The private equity industry is always on the lookout for new sources of liquidity and the secondaries market has been one of the main contributors to ease liquidity constraints, according to an infographic released last week by SEI.

A majority of general partners, limited partners and consultants recently surveyed by SEI agree that liquidity in the private equity market hasn’t improved. Only 36 percent of LPs think the market has become more liquid while GPs are a little less pessimistic with 47 percent thinking it has become more liquid.

That’s where the secondary market can fill the gap. About half of LPs plan to either buy or sell secondaries assets this year, according to the SEI survey.

“Growth in the secondary market has been the biggest contributor to improved liquidity,” noted SEI, adding that while most fund managers and LP investors sell assets directly, a growing number of them plan to sell to dedicated secondaries funds.

The survey found that 12 percent of GPs and LPs typically sell using a secondaries exchange or platform, while 73 percent of them sell assets directly to a buyer or a broker. Meanwhile, 41 percent of GPs and LPs sell to dedicated secondaries funds.

Despite the secondaries market playing an increasingly important role in providing liquidity, few industry players think liquidity needs are being fully met by the secondaries market, with 22 percent of GPs and 19 percent of LPs thinking so.

Listed private equity funds and retail funds have also provided additional sources of liquidity, according to the SEI survey.