LP-led transaction activity analysis

Sales by financial institutions grew significantly in the first half of the year, selling 39% more in dollar volume terms than in the FY 2022. There was greater pressure than in prior years to reduce risk due to overallocation to illiquid assets, underperformance in fixed income securities, and increased scrutiny from regulators.
Corporate and public pensions shrunk as a share of the entire market after being the most active seller in FY 2022. Still, they continued to represent 30% of the market, selectively selling in the secondary market as allocation issues and the denominator effect persisted.
Sales by asset managers increased as they sought ways to supplement liquidity that has fallen off due to reduced M&A activity and traditional exits from sponsors.
Selling from insurance companies was consistent with FY 2022, as the need to create room in alternatives’ portfolios persisted, which encouraged the selling of old investments.

Buyout funds comprised 75% of the secondary market in H1 2023, a slight decrease from 79% of total volume in FY 2022. H1 2023 saw a shift in transaction volume to the middle market reflecting the buyside’s desire to rebalance away from the large cap names, which had higher demand and were easier to sell last year.
Growth equity and venture decreased their share of transactions YoY from 10% to 6%, as pricing continued to be at more deeply discounted levels.
Infrastructure saw a significant increase in its share of transactions from 4% in FY 2022 to 9% in H1 2023, as infrastructure pricing remained robust relative to other asset classes and LPs faced similar allocation issues as in private equity.
Increasing oil prices led to a rebound in energy transaction volumes, reaching 5% of H1 2023 totals compared to 2% in FY 2022. However, there is likely to be a cap on the total transaction volumes as ESG concerns for these assets have limited the buyer set in recent years.

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