Pricing rebounds from pandemic-inflicted lows – Setter

Secondaries market pricing recovered over the summer following the coronavirus-induced lows of spring, according to a price report by Setter Capital.

The average high bid for a stake in a buyout fund was 90.92 percent of net asset value during the 90 days to 31 August, compared with 85.98 percent during the previous 90-day period, the Toronto-headquartered intermediary noted.

A similar trend was present in other strategies with the average high bid for growth, venture capital and funds of funds rebounding by 13.5, 8 and 4.5 percentage points, respectively.

The rebound is primarily driven by government stimulus helping to prop up hard-hit parts of the economy, said Setter’s Nathaniel Robertson, adding that an urge among buyers to deploy capital has increased “competitive tension in the market, which tends to have a positive impact on pricing”.

Real estate went against the trend, with the average top bid dropping from 81.04 percent of NAV to 79.88 percent. Real estate secondaries volumes amounted to $890 million in the first half of the year, a decline of 53.4 percent, Secondaries Investor reported last month.

In year-on-year terms, pricing is still down in every strategy apart from VC, which is up 0.83 percent on the three months to 31 August 2019.

Speaking to Secondaries Investor last week, head of secondaries at Adams Street Partners Jeff Akers said the spread between high and low auction bids has widened considerably in recent months, highlighting the difficulty of pricing assets in a volatile environment.

“Some bids are going in really low because they don’t have insight about [positive] things going on in the portfolio and some are going in really high because they don’t know about the challenges,” Akers said.