GP-led secondaries question 1 icon

The GP-led secondaries market has grown tenfold in only a decade, hitting circa $50 billion in 2022 compared with around $5 billion in 2013, according to figures from advisory firms.

“The GP-led secondary market has boomed in recent years and since the pivotal year of 2020 represents approximately half of total secondary market volume,” says Valérie Handal, a managing director at HarbourVest. “By contrast, a decade ago, GP-led transactions only represented around 20 percent of secondaries deals.”

Last year did see a slight decline on 2021, which was a record year for the GP-led market, with $68 billion of completed transactions. “Nonetheless, the GP-led secondaries market is one of the fastest growing asset classes within private equity,” says Rob Campbell, head of North America for ICG Strategic Equity. “Despite the turbulent economic environment, GP-led activity remained buoyant last year, testament to the fact that sponsors truly see the secondary market as a highly strategic and credible means to provide investors with liquidity.”

The single-asset continuation vehicle market, in particular, has witnessed meteoric growth. “The market was in its incipient stages in 2018, accounting for $2 billion of volume, less than 10 percent of GP-led volumes that year,” Campbell explains. “However, single-asset continuation vehicles now represent the most prominent GP-led transaction type, accounting for over $50 billion of transaction volume from 2021 to 2022.”

“It may sound like a cliché, but the sky really is the limit”

Joseph Marks
Capital Dynamics

Furthermore, Campbell believes that the GP-led market is still in the early stages of its development and has the potential to continue growing at an outsized annual rate, due, in part, to broadened GP adoption, including large-cap sponsors and larger transaction sizes.

Joseph Marks, a senior managing director and head of secondaries at Capital Dynamics, agrees. “It may sound like a cliché, but the sky really is the limit,” he says. “What began as a way of tying up tail-end funds has now entered the mainstream as a tool for managing liquidity. In times like these, when M&A activity levels are materially down and the IPO market is largely shut, GP-leds are becoming the third leg of the liquidity triad. If the GP-led market can take share from each of those other exit routes, then the total addressable market is vast.”

But while GP-leds may benefit from a lack of viable alternatives in the current downturn, Debevoise & Plimpton partner John Rife sees the growth of the GP-led market as unstoppable, regardless of the macro environment. “What’s interesting is that the trend seems to persist regardless of where we are in the cycle,” he says.

The biggest inhibiting factor that could limit that growth, however, is the availability of capital. Pantheon’s global head of private equity secondaries, Amyn Hassanally, believes that total GP-led dealflow in 2022 was almost double the approximately $50 billion that ultimately completed. “The actual opportunity set is massive and the buyside is currently undercapitalised,” he says.