Secondaries transaction volume plummets in H1

Private equity volumes dropped by 58.5% and real estate by 53.4%, with infrastructure showing resilience, according to Setter Capital.

Secondaries transaction volumes dropped precipitously in the first half of 2020 as coronavirus took its toll.

Overall transaction volumes declined 56.1 percent to $20.2 billion in the first half of 2020 from $46 billion in the first six months of 2019, according to a half-yearly review by intermediary Setter Capital.

Private equity volumes dropped by 58.5 percent year-on-year to $17.46 billion, the survey found. Real estate volumes dropped by 53.4 percent to $890 million.

Infrastructure arrested the trend, declining just 4.4 percent. According to Setter’s Prab Rattan, investors view infrastructure assets as safer than other asset classes in a crisis.

“The covid-19 pandemic also highlights the need for public health infrastructure investment, a need that may present further opportunity for infra investors,” he added.

Last week, Secondaries Investor reported that Alaska Permanent Fund had sold a $1 billion portfolio to Strategic Partners in the largest-ever infra secondaries deal. It had planned to sell private equity and mezzanine too but opted for just infra assets because their value has held up well through the crisis.

Sixty percent of respondents felt more secondaries deals fell apart in the first six months of 2020 versus the preceding six months, with only 5 percent responding that fewer deals had fallen through. The seller deciding not to sell was the most commonly cited cause of deal failure.

“There’s volatility and more risk than there was historically. That’s going to work its way into pricing,” a buyer told Secondaries Investor during the height of the crisis in March. “We’ve seen processes get delayed, and we’ve seen some folks that are continuing to see how processes play out and see how prices come in” before choosing to sell.

Among the respondents, 59.1 percent expect transaction volumes to be higher in the second half of 2020 versus the first, with only 6 percent expecting them to be lower. Respondents predicted total deal volume for 2020 of $58.30 billion, representing a 31.7 percent decrease from $85.41 billion in 2019.

Setter’s report is based on the results of a 30-question survey filled in by 96 regular buyers in the secondaries market, including the 10 largest, Setter notes. The report does not include large non-traditional buyers such as ADIA and GIC.