Vincent Gombault: Secondaries market to hit $2trn by 2030

The private assets secondaries market could be more liquid for large LPs than public markets, according to Ardian's former fund of funds head.

The architect of Ardian‘s fund of funds business has produced the most bullish prediction yet on the direction of the secondaries market.

In a newsletter seen by Secondaries Investor, Vincent Gombault wrote that he expects transaction volumes to be as high as $2 trillion by 2030, driven by the growth of private assets under management, an increase in secondaries market churn and the potential for the market to offer even greater liquidity than public markets.

“It is more than feasible for the churn rate to increase to c. 6-8 percent, which coupled with a $26 trillion private equity AUM by 2030, would result in secondary transaction volume of close to $2 trillion,” he wrote, assuming a 15 percent annualised AUM growth rate in line with the last five years.

Earlier this year, Whitehorse Liquidity Partners’ founder Yann Robard said that he conservatively expected the secondaries market to hit $1 trillion in volumes by 2030.

Secondaries market transaction volumes today account for between 1 percent and 2 percent of total private AUM, Gombault noted. The increasing range of solutions offered by the market, and greater awareness brought about by big M&A events and the effects of the pandemic make it “more than feasible” that the churn rate will triple or better, he wrote.

The ratio of primary private capital fundraising to secondaries transaction volumes is approximately 10:1. In the public markets, the proportion of secondary share trading to money raised through IPOs is approximately 1:250, according to Gombault.

A “virtuous cycle” of increased demand for private assets and greater liquidity offered by the secondaries market will allow LPs to redeploy capital more quickly, bringing the ratio more in line with that seen in public markets, he noted.

The secondaries market allows LPs to sell large portfolios without the publicity and broader market reverberations of a public share sale. This could make it a preferable path to liquidity, particularly under time constraints: “I envisage a scenario in which the secondary market becomes the most efficient and discrete tool for large investors to move $10-15 billion mega portfolios in a matter of months… At this scale, the expected deal volume in 2021 could be achieved in only 10 transactions,” Gombault wrote.

Secondaries Investor reported in January that Gombault had departed Ardian after more than 20 years with the firm and its antecedents. Under his watch, Ardian’s fund of funds business grew to $55 billion in AUM, equivalent to just over half the firm’s total assets under management.

Gombault told Secondaries Investor that he is still in his non-compete period during which he can manage his family office Lion Field but have no further involvement in the private equity market. He will produce a quarterly newsletter for close contacts and friends.

He would not discuss the possibility of eventually re-entering the market.