Swiss fundraising platform reports secondaries upswing as VCs seek liquidity

PrivateMarket.io, a Switzerland-based fundraising platform serving private banks and wealth managers, has reported a spike in secondaries activity during the coronavirus pandemic.

Listings of fund interests and direct company stakes on its website rose 37 percent year-on-year in Q1 2020, founder and chief executive Loïc Engelhard told Secondaries Investor. The underlying figures behind this growth are unclear.

Besides private bank clients offloading fund stakes, the uptick includes venture capital firms looking to partially exit portfolio companies to generate liquidity between funding rounds, Engelhard said, noting that some rounds include lock-up clauses prohibiting an existing investor from exiting via traditional means.

“Because of the environment and economy, there are a lot of clients of private banks that are basically looking for liquidity; I think they cannot stand the seven to eight-year lock-up in their PE holdings,” he added.

Direct secondaries – in which shareholders sell stakes in privately held companies – accounts for most of the volume in venture capital secondaries. San Francisco-based Industry Ventures, which specialises in buying secondary venture assets, puts this figure at around one-third of the overall secondaries market.

Buyers anticipate steep discounts on venture funds as a result of coronavirus, according to a March survey from intermediary Setter Capital. Venture capital funds should have sold for about 60 percent of their net asset value in March versus about 78 percent several months prior, respondents to the survey said.

“What we have seen is a sudden hope to get a discount for certain prime stakes either into big funds or underlying companies, but so far we don’t see a massive discount,” Engelhard noted. “We mostly see a valuation which is at par, even if we see a lot of buyers trying to argue that there should be a discount.”

An April survey of 79 global LPs by placement agent Probitas Partners found that 67 percent were interested in investing in secondaries funds, compared with 58 percent at the same time last year. Special situations was the only other strategy to grow, highlighting an opportunistic approach some investors may be taking to invest in repriced assets.

Founded in 2016, PrivateMarket.io had facilitated around $250 million of fundraising as of February, sister title Private Equity International reported. The firm launched an impact strategy last year and has since raised at least $20 million across two such vehicles in addition to its existing venture capital, real estate and private equity strategies.