Secondaries pricing for buyouts in first half hovers near 2020 low

Pricing for buyout funds fell in the first half as buyers and sellers contended with widening bid-ask spreads in a downturn market.

Average pricing as a percentage of net asset value fell from 97 percent in full-year 2021 to 88 percent in the first half, “a level not seen since the 2010-2013 period in the aftermath of the GFC, if we exclude the 2020 covid-19 year,” Bernhard Engelien, managing director and head of European secondary capital advisory at Greenhill told Secondaries Investor following the investment bank’s global secondary market review.

Buyout pricing on the secondaries market fell to 85 percent of NAV in the first half of 2020, according to historic Greenhill reports, as the coronavirus outbreak spurred unprecedented uncertainty. Pricing rebounded to 89 percent for the full year. Since 2010, the average price of a buyout fund reached a low point in full-year 2012 (84 percent) and peaked in 2017 (99 percent).

The main driver of the pricing drop in the first half was the decline in public markets and comparable multiples as well as the worsening economic outlook in the US and Europe. “Buyers applied a mark-to-market to stale Q4 2021 and Q1 2022 NAVs, resulting in larger optical discounts,” Engelien added.

Pricing for venture and growth funds also reached a six-and-a-half-year low, dropping to 76 percent of NAV in the first half, down 3 percentage points on last year, according to Greenhill’s latest report. The comparatively smaller drop was driven by the fact that pricing for these strategies started to correct in late 2021 before the broader market correction, according to the report.

Overall, however, the median high bid across asset classes remained resilient in the first half, driven by increased bids for credit funds. The median was 92 percent of NAV, in line with 2021’s 91 percent, with pricing for credit funds increasing to 100 percent in the first half, up from 89 percent of NAV in 2021 and a record across the eight-and-a-half years the report detailed.

Greenhill attributed the increase to the growing number of buyers raising dedicated pools of capital for credit secondaries, which is only partially met with supply of quality funds.