Prices of LP stakes to decline 5-7% in H2

Secondary prices for LP fund stakes are expected to decline by between 5 percent and 7 percent during the second half of the year, according to data from advisory firm NYPPEX.

During the first half of the year, the average high bid was roughly 98 percent of NAV for LP stakes in private equity funds in the US, Europe and Asia. During the second half of the year, the average high bid is expected to decline to between 91.1 percent and 93 percent of NAV.

“Current secondary prices are historically high and not sustainable in our view,” NYPPEX managing member Laurence Allen said.

NYPPEX also expects prices for direct secondaries transactions to decline by between 6 percent and 8 percent, as a result of significantly greater secondary supply, lower third quarter NAVs and lower cash distributions from slowing exits.

Last month, Secondaries Investor reported pricing data from alternative asset-focused investment bank Cogent Partners that is in line with NYPPEX’s figures. According to Cogent, the average high bid for a buyout transaction reached 100 percent of NAV during the first half of the year, marking the first time buyouts — or any other strategy — priced at or above NAV since 2007. Cogent cited high levels of available capital to purchase secondaries as one of the main drivers behind the price increases. However, Cogent expects premium pricing to persist during the second half of the year, absent any big shocks.