08 │ Secondary buyer target returns analysis
Significant variation in target returns depending on underlying asset class.
Net IRR
Net Multiple
Reduced target return hurdles across the board on a net multiple basis show positive shift in buyer sentiment.
Movement in survey respondents’ target returns by investment strategy
Net IRR – Delta between weighted average midpoint of 2023 versus 2022 responses
Net Multiple – Delta between weighted average midpoint of 2024 versus 2023 responses
Buyer target returns came down for every asset class on a net multiple basis and only went up on an IRR basis modestly for a few sectors compared to 2022. An increase in target IRR for private credit and preferred equity was clearly driven by interest rate hikes. However, the charts above generally indicate that, as of the end of Q4 2023, which is when our survey was circulated, secondary buyers generally felt more comfortable with the direction of the economy than they did at the same time in 2022. The movement in target returns is slight, but potentially telling for the trajectory of pricing, which may continue to rise in 2024.
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