July 10, 2023 Pitchbook : LP-led secondaries volume is expected to overtake GP-led volume this year

LP-led deals are poised to lead the secondary market in 2023. Fueled by more favorable pricing agreements, LP-led deals could overtake GP-led volume by a 60/40 (or maybe even a 70/30) split. (read more…)

CATEGORY: capital, downturn, secondaries

February 8, 2021 Institutional Investor : What Investors Lose in an Undeveloped Secondary Market

Using Oxford Economics’ macroeconomic forecasts, the paper’s authors argued, for example, that investors should be cautious about their current allocations to venture capital as the sector is flush with capital and competition for deals has pushed valuations to near records. Assuming that the economy remains in a rut for the next five years — Oxford’s baseline economic forecast — the researchers projected lower expected returns relative to history in private equity and private debt. They said that private debt will still be an important source of diversification, because those assets outperform similar public credit instruments. The researchers also expect natural resource and real estate funds to outperform in the next few years. (read more…)

CATEGORY: capital, secondaries

March 25, 2020 Tech Crunch : Market players won’t find buyers on the secondary market — yet

Chris Douvos, a longtime investor in venture funds, observes that there’s an “immense amount of capital looking for fund stakes,” meaning from outfits like Industry Ventures and roughly 75 other players in the market. “If I’m a VC right now, I’m wondering when [these] investors — folks who have billions of dollars in committed capital and love to buy fund stakes at 65 cents on the dollar — start capitulating, but that’s like six to nine months out when you really see [these transactions] happen.” (read more…)

CATEGORY: downturn, secondaries, valuation

February 10, 2016 Techcrunch : Secondary Shops Flooded With Unicorn Sellers

As the fortunes of billion-dollar companies like Evernote have fizzled, however, so has their shareholders’ enthusiasm. Says the cofounder of one secondary shop who asked not to be named, “We aren’t seeing huge discounts yet in the top 10 names, but people are trying to dump them. It’s not just one person calling you about a particular company. It’s four.” Says another secondary investor, who also asked not to be identified for this story, “We’re seeing an enormous uptick in inbound selling interest.” (read more…)

CATEGORY: downturn, secondaries, valuation

April 14, 2015 Saints Capital : A Guide to Secondary Transactions: Alternative Paths to Liquidity in Private Companies

The sale of private company shares on the secondary market is becoming increasingly prevalent as the timeline to reach a liquidity event has lengthened over the last decade. In order to proactively manage secondary transactions, the boards, management teams, and investors of these companies need to be aware of the relevant issues, challenges and considerations. (read more…)

CATEGORY: capital, secondaries, valuation

June 20, 2014 Capital Dynamics : Introductory Guide to Investing in Private Equity Secondaries

The average high bid from 2006-2007 was above 100% of the reported NAV, i.e. buyers paid premiums to NAVs across all strategies, betting on further appreciation potential for the acquired funds. In 2008, following the collapse of Bear Sterns in February, the dramatic events in September 2008 and the ensuing ‘great financial crisis’; prices in the second half of the year fell sharply and continued to be at a very compressed level through 2009, reflecting widespread financial distress that some Sellers found themselves experiencing while the Buyer community experienced uncertainty and risk-aversion. At the prices offered, only the most liquidity-pressed Sellers actually sold. Consequently, the overall transaction volume pulled back and ended up at an estimated USD 10 billion, or merely 50% of the levels seen in 2008 (see Figure 2). In 2010, markets and economies around the world started to recover, as did pricing in the secondary market. Transaction volumes and pricing quickly rebounded to more normalized levels. Since 2010, as market participants became increasingly optimistic, both transaction volumes and initial high bids have risen to 90% of NAV for all strategies in the second half of 2015. (read more…)

CATEGORY: capital, secondaries

January 25, 2008 Millennium Technology Value Partners : Inside the Growing Secondary Market for Venture Capital Assets

For the last decade, secondary market activity involving all types of private equity investments has been a booming and increasingly efficient aspect of the far larger overall private equity market. Total secondary private equity transactions have grown 14-fold over the last ten years, from approximately $600 million in 1998 to well over $8 billion in 2007. A typical venture capital partnership is organized around a 10-year lifespan. During this ten year period many internal and external forces may intervene that can result in investors desiring earlier cash distributions. The vicissitudes of time and financial markets can also suggest critical changes in strategy or technology or sector focus are needed. For these reasons, investors—as well as venture capital fund managers themselves—are increasingly interested in tapping the secondary market for partial or complete exits earlier than seven years into an investment. (read more…)

CATEGORY: secondaries, VC