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Roughly 17% of secondaries transactions use leverage

Leverage was predominantly used to buy portfolios of stakes in mature buyout funds, according to Evercore.

Leverage was used in 17 percent of secondaries transactions last year, Evercore estimated.

It was most prominently used to acquire portfolios of stakes in mature, cash-flowing buyout funds. These portfolios of stakes from 2006- to 2007-vintages made up most of what Evercore marketed last year, according to Nigel Dawn, global head of private capital advisory.

“It’s very common in the market to allow buyers to pay for the purchase over time, which increases the price. I imagine the usage will only increase further.”

Most dedicated secondaries funds use leverage in the form of vendor-provided leverage or deferred payments. Bank-provided leverage is only expected to increase this year, Dawn explained.

Source: Evercore