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Secondaries volume to reach new highs in 2014

The growing amount of cash stockpiled by fund managers is driving private equity secondaries activity to new highs, according to Triago’s latest research.

Annual secondaries market volume will increase by more than 36 percent to over $30 billion this year, beating 2012’s record of $26 billion, according to figures published by Triago, the placement and advisory firm.

The firm said first quarter private equity secondaries activity hit $11 billion, noting it was a new record driven largely by the $50 billion in dry powder that has been raised for secondaries investment. By comparison, secondaries deal activity for the first four months of 2013 reached $7 billion.

Dealflow is also strong because investors are allocating their private equity distributions into secondaries, Triago said in a blog post. “To avoid investing disproportionately in the 2013 private equity fund vintage — which faces particularly tough competition prospects as asset prices rise above the peak average of 9.7 times corporate cash flow last seen in the credit bubble year of 2007 — investors are allocating significant amounts of record net PE distributions to the secondary market for existing fund stakes.”

“High multiples mean an exit market where mature funds bought via secondaries sell investments quickly, at prices above carrying values, particularly through initial public offerings.”