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LP trades sustain pricing on increasing transaction volume

A stake in CD&R's 2018-vintage fund sold for 124% of NAV, according to a survey of 52 transactions by Palico, with average pricing of 98.5%.

Pricing remains at or above pre-pandemic levels as LP portfolio deals come flooding back to the market.

LP transaction volume was up 19 percent quarter-on-quarter during the third quarter, according to a survey of successful bids in the past quarter conducted by online marketplace Palico. Half of the 52 funds captured in the report priced at a 2 percent discount to net asset value or better.

A stake in Clayton, Dubilier & Rice X sold for 124 percent of NAV, according to the Palico survey. That makes it the highest priced of the 52 funds under consideration.

A significant premium may be driven by high conviction on the part of the secondaries buyer, assets in the fund being marked conservatively or by positive post-reference-date developments, said head of LP secondaries at M2O Private Fund Advisors Jake Stuiver.

CD&R embarked on a massive GP-led process, Secondaries Investor reported in August, to lift glass repair business Belron out of Fund X into a continuation vehicle that could be worth up to $5 billion.

Some buyers may also be bidding up quality LP portfolios to lock in more diversified exposure after becoming saturated with GP-led transactions, Stuiver added.

Pricing has vastly improved through the pandemic. Two-thirds of LP deals priced at 10 percent of par or better in the first half of 2021, compared with 36 percent in full-year 2020, according to a survey by advisor Campbell Lutyens.

Barring any unpredictable macro events, pricing is expected to sustain at these levels next year, driven by astronomical fundraising and dry powder, according to M2O’s Stuiver:  “Any portfolio of sufficient quality will get strong pricing.”