New York-based secondaries advisory firm NYPPEX estimates that tail-end funds comprised approximately 26 percent, or $6.46 billion, of total secondaries transaction volume in private funds worldwide in 2013, as compared to 14 percent in 2012.
The firm defined tail-end funds as either 9 years of age (or older) or that have 30 percent or less remaining unrealized value as a percentage of commitments.
The firm said the primary driver of the growth of 12 percent from 2012 was “a more disciplined approach to managing costs and improving operational efficiencies” by limited partners and general partners.
NYPPEX estimated that the $6.64 billion represented less than 1 percent of the approximate $1.6 trillion in total unrealized value of tail-end funds worldwide.
And the firm said the growth trend in this part of the market is set to grow, and could approach a 2 percent turnover rate or a turnover of $32 billion (i.e. 2% x $1.6 trillion), which it said “supports our view that secondary transaction volume may significantly increase in the coming years”.
And the firm gave an insight into some of the high pricing paid for vintage funds between 1996 and 2001 as a percentage of NAV last year.
NYPPEX said the best prices in tail-end funds were “a function of insightful due diligence with underlying general partners to identify hidden values, scenario return analytics provided to prospective buyers that lack time to model portfolios and a proactive marketing approach with established relationships worldwide.”
NYPPEX said it has specialised in advising on tail-end fund divestitures since 2003.