01 │ Highlights
Key themes in H1 2024
The secondary market saw its long-anticipated resurgence in the first half of 2024 as bid-ask spreads narrowed, unlocking a long tail of pent-up transaction volume. On the back of a record fundraising year, secondary buyers exhibited an increased appetite to deploy capital which supported improvements for both LP and GP-led pricing. Overallocated sellers, hungry for liquidity after years of minimal distributions, capitalized on the favorable pricing environment to rebalance their portfolios. Single-asset continuation vehicles came roaring back as mid-market sponsors held onto their best assets. With a wave of new entrants, both buyers and sellers, we believe 2024 could set a new high for secondary volumes.
1
Transaction volumes grew by 72% year-over-year to $69bn, with the full-year on track to reach $137bn.
2
LP-led transactions recorded $36bn of volume (62% increase from H1 2023) as pricing improved across nearly all asset classes, with average secondary pricing climbing to the high eighties.
3
There was a meaningful increase in the number of GP-led transactions that closed at par or better in H1 2024, as compared to H1 2023.
4
Elevated demand for technology assets.
5
General secondary fundraising slowed; however open-ended funds saw a new influx of capital.
Highlighting the continued growth of the market, H1 2024 deal flow was the largest on record. The leading driver was liquidity, as traditional exit routes remain subdued, sponsors and LPs turned to the secondary market as an alternative solution. Following the robust fundraising environment which saw $86bn raised in FY 2023, many buyers had fresh dry powder to deploy.
Sellers benefited from improved pricing, with buyers looking for diversification for their newly raised funds. Institutional LPs have taken a more active approach to portfolio management as stronger pricing made the secondary market a viable alternative for more traditional liquidity. We expect this trend to continue as we drive successful outcomes for repeat clients.
Investors continue to focus on prized assets with reasonable valuations and strong sponsor alignment. GP-led transactions represent good relative value in the face of increasing LP-led pricing. The average EV/EBITDA multiple of closed deals was 13.5x compared to 17.2x for the S&P 500¹. Desirable assets and increased demand led to an 86% increase in GP-led volume compared to H1 2023, reaching nearly $28bn.
The market for technology and VC / Growth assets strengthened in the first half of 2024 for the first time in a couple years as interest rates and valuations began to stabilize. LP-led volumes for VC / Growth funds grew by 135% compared to H1 2023, increasing by nearly $2bn. Over the same period, Information Technology nearly tripled its share of GP-led transactions, representing one-third of the volume in H1 2024. Increases in public multiples during the first half of the year created an opportunity for optical discounts in the private market, driving increased demand.
Most large secondary buyers were not fundraising in H1 2024, as they closed their latest flagship funds last year. In their absence, the focus shifted toward specialized investment vehicles including raising capital from retail investors through open-ended offerings such as '40 Act funds. We estimate 11 of the top 20 buyers have raised or are currently in the market raising open-ended vehicles, adding $15bn of capital towards secondary investments, with another 4 expected to raise in the near future.
1
Transaction volumes grew by 72% year-over-year to $69bn, with the full-year on track to reach $137bn.
Highlighting the continued growth of the market, H1 2024 deal flow was the largest on record. The leading driver was liquidity, as traditional exit routes remain subdued, sponsors and LPs turned to the secondary market as an alternative solution. Following the robust fundraising environment which saw $86bn raised in FY 2023, many buyers had fresh dry powder to deploy.
2
LP-led transactions recorded $36bn of volume (62% increase from H1 2023) as pricing improved across nearly all asset classes, with average secondary pricing climbing to the high eighties.
Sellers benefited from improved pricing, with buyers looking for diversification for their newly raised funds. Institutional LPs have taken a more active approach to portfolio management as stronger pricing made the secondary market a viable alternative for more traditional liquidity. We expect this trend to continue as we drive successful outcomes for repeat clients.
3
There was a meaningful increase in the number of GP-led transactions that closed at par or better in H1 2024, as compared to H1 2023.
Investors continue to focus on prized assets with reasonable valuations and strong sponsor alignment. GP-led transactions represent good relative value in the face of increasing LP-led pricing. The average EV/EBITDA multiple of closed deals was 13.5x compared to 17.2x for the S&P 500¹. Desirable assets and increased demand led to a more than 86% increase in GP-led volume compared to H1 2023, reaching nearly $28bn.
4
Elevated demand for technology assets.
The market for technology and VC / Growth assets strengthened in the first half of 2024 for the first time in a couple years as interest rates and valuations began to stabilize. LP-led volumes for VC / Growth funds grew by 135% compared to H1 2023, increasing by nearly $2bn. Over the same period, Information Technology nearly tripled its share of GP-led transactions, representing one-third of the volume in H1 2024. Increases in public multiples during the first half of the year created an opportunity for optical discounts in the private market, driving increased demand.
5
General secondary fundraising slowed; however open-ended funds saw a new influx of capital.
Most large secondary buyers were not fundraising in H1 2024, as they closed their latest flagship funds last year. In their absence, the focus shifted toward specialized investment vehicles including raising capital from retail investors through open-ended offerings such as '40 Act funds. We estimate 11 of the top 20 buyers have raised or are currently in the market raising open-ended vehicles, adding $15bn of capital towards secondary investments, with another 4 expected to raise in the near future.
Source: CL Research
- S&P Capital IQ as at 7/12/2024. Past performance is not indicative of future results
Secondary market poised for record-breaking year in 2024, fueled by strong pricing, new entrants, and evolving liquidity needs.
Annual secondary market volume
- Secondary transaction volume in 2024 is forecast to be approximately $137 billion, driven by elevated pricing and a flood of new market participants.
- Transaction volumes were propelled in H1 2024 as the bid-ask spread contracted. Buyers had significant dry powder levels, approximately $171 billion, to deploy whereas sellers (both LPs and GPs) turned to the secondary market in the hunt for liquidity.
- Secondary investors only raised $28bn of capital in H1 2024, compared to $86bn for FY 2023, as the fundraising focus shifted away from large generalist funds to raising specialized vehicles for strategies such as infrastructure, credit, venture, and open-ended funds¹.
Secondary-focused capital
- Open-ended funds in this context refer to vehicles which offer retail investors the opportunity to invest in secondary transactions through structures with minimal buy-in and regular liquidity options (such as those organized under the 1940 Investment Companies Act)
- $68bn CL estimate based on market knowledge and consensus of buyer forecasts. Estimated figures are shown for indicative purposes only and do not guarantee a particular result
- Does not include leverage; as of June 30, 2024
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