NYPPEX: bear market sentiment drove H1 volume

Some investors believe a bear market is already here and are starting to derisk, according to research by the secondaries trading platform.

Bearish market sentiment on the world economy drove first-half secondaries deal volume to a record level, according to research by NYPPEX Private Markets.

Secondaries transaction value increased by 7 percent year-on-year in the first half of 2018 to $22.1 billion, bolstered by several large portfolio transactions and an especially busy second quarter, according to excerpts from the firm’s mid-year report seen by Secondaries Investor.

There is a divergence between those who are reducing their exposure to certain sectors in anticipation of a downturn and those who are more bullish about the economy’s near-term prospects, the report noted.

“Some private equity investors believe we are now in a bear market,” said the firm’s chief executive Larry Allen. “This is not apparent at the stock index level, but rather, it is occurring within specific industries or regions whose valuation multiples are contracting… Other investors believe that interest rates and stock markets will remain within the current range throughout 2018, and are fine to utilise leverage and purchase secondary interests.”

The secondaries trading platform estimates that transaction volumes in the second half of 2018 will be up 12 percent year-on-year, resulting in another record year. NYPPEX put full-year transaction volumes for 2017, the current record year, at $41.4 billion.

NYPPEX’s first-half transaction figures are lower than those of advisors Greenhill Cogent and Evercore, which estimated between $27 billion and $32 billion respectively.