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Pandemic pricing: Growth leads the recovery

Growth, VC and distressed funds have had significant shrinkages in discounts to NAV, according to Setter Capital's latest pricing report.

Pricing for the most in-demand assets and the funds that house them has rebounded strongly compared with the start of the pandemic, data from Setter Capital shows.

Growth and venture had significant price recovery in terms of discounts to net asset value, according to the intermediary’s latest Pricing Report dated April 2021.

The report analysed 143 growth funds priced as of end-April last year and again at the same point this year, average top prices increased 26.1 percent – more than funds of any other asset class. Average pricing for growth funds now sits at less than a 5 percent discount to NAV.

“Demand for technology exposure and growth assets in general has risen, evidenced by public market valuations being up significantly relative to earnings over the last 12-18 months across most tech sub-sectors and indexes,” said Joe Goldrick, a partner focusing on secondaries investments at Adams Street Partners. He added it is important to maintain pricing discipline and have an information edge to successfully compete in the secondaries  industry today.

Growth fund pricing in the secondaries market reflects the interest on the primary side: of the top 10 firms in the PEI 300, half have either launched or raised capital for dedicated growth funds in the last two years. The largest is the debut growth fund from Blackstone, which closed on its $4.5 billion hard-cap in March.

Meanwhile, KKR raised $2.2 billion last year for its second technology growth fund, while Carlyle Group, Thoma Bravo and EQT are all in market with growth funds targeting $2 billion, $3 billion and €2 billion, respectively.

Fundraising activity in growth has followed suit through the entire private equity ecosystem: 52 growth equity funds raised $32 billion in the first quarter of 2021, up from 44 funds that raised $21.9 billion in the first quarter of last.

Venture and distressed funds gained 18.2 percent and 10.4 percent respectively, while private equity funds of funds also priced strongly, gaining 11.4 percent.

Energy funds found a floor, notching a 19.5 percent increase over the period – the second-biggest gain among fund strategies.

Average discount to NAV across leveraged buyout funds sat at 10.7 percent in the three months to end-April 2020, amid pandemic-fuelled uncertainty. In the three months to end-April this year it rose to a 5.6 percent discount.

Infrastructure funds took the top spot in terms of trading closest to NAV, pricing at a 3.8 percent discount.