Market will take nine months to return to normal – survey

Buyers' own rates of deployment will decrease by nearly 30% over the next two months, according to Setter Capital.

The secondaries market could suffer disruption until at least the end of the year, research from an intermediary suggests.

According to a survey of 39 buyers conducted in mid-March by Setter Capital, it will take an estimated 9.4 months before the market returns to “normal levels” of buying and selling. Transaction volume for this year is estimated to be down by 28.5 percent year-on-year, the Toronto-based firm found.

Greenhill, Setter and Evercore estimated last year’s transaction volume to be $88 billion, $84.4 billion and $80 billion, respectively.

The respondents to Setter’s survey said their own rate of deployment would decrease by an average of 29.7 percent over the next two months.

Respondents estimated that fund stakes across all asset classes are trading at a 61.8 percent discount from December net asset values. Energy and real estate funds are among those trading at the biggest discount: 41 percent and 56.7 percent of NAV, respectively.

Funds of funds, venture capital and buyout funds are trading at an estimated 68.3 percent, 60 percent and 77.3 percent of December NAV, the survey indicated. This pricing analysis only takes into account Europe- and North America-focused funds of 2010-2017 vintage.

“Perhaps I am pessimistic, but I thought that the decrease in short-term secondary market volume, fundraising and pricing would be more significant than what the survey participants suggested,” said founder Peter McGrath. “Hopefully they prove the wiser.”

Last week, Secondaries Investor noted that buyers were gearing up to take advantage of widening discounts on the secondaries market brought about coronavirus uncertainty.

Speaking on Partners Group’s earnings call in mid-March, co-chief executive David Layton said: “As liquidity needs increase, the relevance of that investment type [secondaries] increases. Our secondaries team is anticipating a large spike in opportunities at attractive levels coming their way.”

Participants in the survey included Intermediate Capital Group, Morgan Stanley and CBRE Global Investment Partners, Setter confirmed. Large buyers accounted for around 11 percent of respondents, mid-sized for 56 percent, with the rest made up of small buyers.