GP-led transactions grew to account for nearly 50% of the total secondary market last year. Unlike the traditional LP-interest sale, the GP-led model involves underlying fund managers organizing liquidity in their own funds. GP-led transactions grew to account for nearly 50% of the total secondary market last year
The first six months of the year saw deal volume at just $18 billion, 3 but activity flourished in the second half of 2020 when deal volume reached $42 billion 3 – nearly matching the levels of 2H 2019 – with GP-led transactions leading the way. Relative to the global financial crisis of 2008, there were fewer distressed situations and many sellers remained in “wait and see” mode. In March, when the US and European economies shut down due to the pandemic, the investment deal pipeline effectively dried up and sales were postponed, leading to very few transactions from March to May. GP involvement creating opportunity for select LPįigure 1: Growing Secondary Market with Attractive Risk-Adjusted Returns 1.Segmentation of buyer universe leaving gap in middle market.Market volatility driving attractive arbitrage opportunity.Discount at entry driving j-curve mitigation.While the first half of 2020 saw an initial slowdown in secondary market activity due to the onset of COVID-19, the latter half of the year experienced a very strong rebound. Therefore a surge in interest last year was not surprising. Investors are typically drawn to secondaries to take advantage of their structural and cash flow benefits, and importantly their ability to capitalize on market inefficiencies. Despite the global health and economic challenges the pandemic presented in 2020, the year also provided an opportunity in the secondary market not seen since the Global Financial Crisis.
0 kommentar(er)
