Large firms continue to hold the greatest amounts of dry powder in the secondaries market and that figure is growing, according to a report by UBS Private Funds Group.
“The big are getting bigger,” UBS wrote in its Latest Trends in the Secondary Market, seen by Secondaries Investor. The firm based its research on a survey conducted in early 2016.
Among secondaries buyers, 16 have $1 billion or more of dry powder. Nine of these have $2 billion or more. It is not clear how UBS defined dry powder in the survey.
UBS estimates there is currently $55 billion in dry powder, up from $49 billion last year. The figure is likely to rise with 13 of the top 20 dedicated secondaries buyers currently at some stage in the fundraising process, the report notes.
The top 15 buyers in the secondaries market hold about three-quarters of all dry powder in the market. These buyers conducted about 80 percent of all deals by transaction volume last year, according to the report.
UBS also notes that despite high levels of capital to invest in secondaries, buyers are continuing to use debt at deal level. Almost a third of buyers used deal acquisition leverage, according to the report, which does not specify a time period for its survey.
Fund facilities were the most popular form of leverage with almost 80 percent of respondents stating they had used this type of debt. Special purpose vehicles (SPVs) were used by the remaining 21 percent.