Secondaries fundraising more than doubles to hit all-time high

The secondaries market has hit yet another milestone, with more capital raised for secondaries strategies last year than any other year in the subsector’s history.

Data from Secondaries Investor reveals how funds that held final closes for secondaries across all asset classes hit $117.92 billion last year. That figure is more than double the prior year’s $53.28 billion and almost 17 percent higher than the previous record set in 2020 when $101.14 billion was raised.

“In a dislocated market where the bid-ask between buyers and sellers of assets diverged, LPs saw a clear rationale for secondaries funds that are able to purchase portfolios and crown jewel companies at discounts to where GPs hold them,” Sunaina Sinha Haldea, global head of the private capital advisory at Raymond James, told Secondaries Investor.

Institutional investors see the relative size of the private equity primary and secondaries markets, Sinha Haldea said, adding that the secondaries market of today has room for growth. “That makes the secondaries investor in the unique position of picking their deals among a flood of opportunities available to them. That’s the opportunity set and asymmetric risk-return profile that LPs are backing.”

Two of the market’s biggest secondaries funds closed last year: Lexington Partners amassed $22.7 billion for Lexington Capital Partners X, and Strategic Partners raised $22.2 billion for Fund IX and an additional $2.7 billion for its GP-led focused Strategic Partners GP Solutions vehicle.

Goldman Sachs Asset Management also raised its largest fund last year, closing on $14.2 billion for Goldman Sachs Vintage Fund IX.

In total, 92 secondaries funds held their final close during the period, marking the second-highest year by vehicle count close.

By asset class, private equity secondaries accounted for the bulk of the capital raised at 85 percent. PE secondaries funds raked in $99.85 billion, nearly triple the prior year’s $34 billion.

Real estate-focused funds also grew as a proportion of capital raised, accounting for 7 percent of last year’s total, up from 2 percent in 2022. They collected $8.73 billion last year, a 10-fold jump from 2022 when roughly $870 million was raised for the asset class.

Infrastructure – a strategy undergoing heightened interest in recent months – took in $7.39 billion, slightly lower than the $8.39 billion collected in 2022.

For private debt, funds closed on $1.8 billion last year – less than half the $4.99 billion raised for the strategy the prior year.

There is a record amount of dry powder for secondaries, with $166 billion in unspent capital, including next 12 months fundraising estimates, according to data from Evercore.

The topic of whether the secondaries market is well capitalised remains a contested one and calculating the real capital overhang ratio for secondaries can be tricky. Yann Robard, founder of preferred equity specialist Whitehorse Liquidity Partners, told Secondaries Investor last year there is only between six months to one year’s worth of dry powder for the strategy.

Data shared with Secondaries Investor at the end of last year by one of the market’s biggest buyers put the figure at 1.2 years’ worth of dry powder.