The ILPA Secondaries benchmark, which tracks pooled net internal rates of return, delivered higher returns across yearly, three-year, five-year and 10-year timeframes than it did in the previous quarter, as well as over the same period last year.
Secondaries performed best across a yearly period, delivering an 18.8 percent net IRR as of 31 March.
When compared with the ILPA All Funds benchmark, secondaries outperformed across just two time periods: yearly and 10-year. This is a slight improvement on a year ago when the strategy had outperformed across just the 10-year timeframe.
Amid high levels of dry powder – as much as $121 billion including leverage, according to Greenhill Cogent – underwriting rates have remained stable. Buyers are underwriting at a multiple of 1.2x to 1.4x and an implied IRR of 10 percent to 15 percent on an unlevered basis, Bernhard Engelien, a managing director at Greenhill, told Secondaries Investor.
“We are not too concerned about the increasing levels of dry power, as the ratio of dry powder to last 12 months transaction value stands at 1.9x,” Engelien said. In January the ratio was 2.2x and a year prior to that it stood at 3x, he added.
The ILPA data is based on returns for 3,886 funds.