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NYPPEX: 2014 deal volume hit $52bn

LP stake sales represented more than two-thirds of secondaries deal volume last year, according to NYPPEX. The advisory firm led by Laurence Allen predicts 2015 deal volume will climb to $65bn.

Global secondaries deal volume was estimated to be $52 billion in 2014 including the sale of limited partner interests and direct secondaries deals, according to a statement from NYPPEX Private Markets.

The sale of LP interests represented more than two-thirds or $32.8 billion of the total volume, with direct secondaries making up the remainder.

Laurence Allen
Laurence Allen

The bulk of the stakes traded were buyout-focused (43 percent), followed by real estate, venture capital, fund of funds, infrastructure, energy and natural resources, distressed debt and hedge funds.

Tail-end funds made up 35 percent or $11.4 billion of the fund stakes traded. NYPPEX defines tail-end funds as nine years or older or funds with 30 percent or less remaining unrealised value.

Historically, tail-end funds have not made up most of the volume, however NYPPEX chief executive officer Laurence Allen believes they will comprise a steady percentage of overall volume in the future.

“For the last five years on average, we estimate the number of new investments exceeds the number of exits 4:1 across all strategies in the US. We estimate that ratio is wider in Europe and much wider in China, so unrealised value continues to pile up and needs to exit somehow. Today, GPs and LPs are aligned in their objective to reduce tail-end funds to increase operating efficiencies.”

There was also heavy secondaries volume in funds from 2007 to 2009-vintages, as LPs  reduced their allocations to capital appreciation/equity funds, such as private equity, in favour of lower risk/cash flow funds such as infrastructure, Allen explained.

NYPPEX expects secondaries volume to reach about $65 billion in 2015, including $40.6 billion-worth of LP interests traded.

Source: NYPPEX