PE Key Trends Blog

2020 Outlook: Secondaries and a Market Vulnerable to Shocks

Dec 23, 2019 4:05:00 AM / by palico posted in Private Equity KeyTrends, Secondary Market

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The likelihood of a recession in the coming 12 months rather depends on which economist you speak to, and whether their glass is half full or half empty. One question on the minds of PE investors is, assuming there is an economic moment of reckoning on the horizon, what this will mean for their private equity portfolio and asset allocation. Regular readers of Palico's blog will already know that we have discussed the potential for the 'denominator effect' to throw portfolios out of whack, forcing investors to seek liquidity in the secondary market in order to downsize their PE exposure relative to other, more fluctuating asset classes.

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The Untapped Potential of Private Debt Secondaries

Dec 5, 2019 9:53:19 AM / by palico posted in Private Equity KeyTrends, Secondary Market

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Measured against the circa $70bn private equity secondaries market, private debt secondaries are small potatoes. For now, at least. However, good sense suggests that is about to change. So far, 2019 has provided compelling evidence of what could be the coming advent of private debt secondaries.

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Intelligent Bidding: Navigating NAVs

Nov 7, 2019 6:12:08 PM / by palico posted in Private Equity KeyTrends, Secondary Market

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Unlike picking stocks, private equity investing is something of a black-box exercise. Select a GP, entrust that manager with committed capital and hope that they diligently curate a portfolio of assets that reap rewards over the coming decade. Secondaries, meanwhile, put investors in a far more transactional, hands-on role. This is where it is important for investors to fully understand the dynamics between current reported value and the potential for future upside.

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Palico Private Equity Secondary Pricing Report Q3 2019

Oct 23, 2019 5:02:49 PM / by palico posted in Private Equity KeyTrends, Secondary Market

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Dormant secondary fundraising market belies long-term trend

Sep 26, 2019 12:06:23 PM / by palico posted in Secondary Market

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dormant secondaries post blog post

It has been all quiet on the secondaries fundraising front so far this year seeing only seven final closes worth a combined $2.4bn, a considerable shortfall on the $30bn raised during the same period last year. Average fund size has also fallen by more than half from $876m in 2018 to $395m, Preqin figures show. 

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Secondaries “go big”, but what about the forgotten middle?

Aug 29, 2019 1:16:54 PM / by palico posted in Secondary Market

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Secondaries “go big”, but what about the forgotten middle_article image

Secondaries fund managers are in an arms race. For the last few years, Ardian and Lexington Partners have been vying for the top spot, raising successively record-breaking vehicles to snatch up every pre-owned PE fund stake in sight. However, they’re not the only ones amassing hefty arsenals. Nine of the ten largest firms in the market at the beginning of 2019 had raised the targets on their latest flagship funds by an average of 75%, PEI data show, in a case of “go big or go home”.

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GP-Led Best Practices:  The right way to approach this growing sector of secondary transactions

Aug 1, 2019 5:00:18 PM / by palico posted in Secondary Market

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gp-led best practices image

 

Proactive communication, transparency, and fair timelines are essential to preserving investor relationships

GP-led secondaries hit a record $22bn in 2018, a 38% increase on the previous 12 months and triple the levels seen a year earlier. The momentum has continued into 2019 with H1-2019 doubling the figures from H1-2018.

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When the Denominator Effect Comes Calling

Jul 19, 2019 1:52:43 PM / by palico posted in Secondary Market

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Denominator effect article image

Few talk about the denominator effect these days, but they soon will. For those with short memories, the phenomenon refers to the relative weighting to private equity (the numerator) in an investor’s portfolio growing by virtue of a fall in the public markets (the denominator). This skews target allocations, forcing LPs to rebalance their portfolios by selling fund positions in the secondary market.

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Secondary Pricing Report H1 2019 - Funds Sell at Par in a Market Poised for Record Volume

Jul 11, 2019 11:07:33 AM / by palico posted in Private Equity KeyTrends, Secondary Market

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Secondary Pricing report H1 2019

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LPs turn to the secondary market in preparation for a hard landing

Jun 28, 2019 2:07:23 PM / by palico posted in Secondary Market

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It’s time to adopt the brace position. Tough times are on the way. There are few who doubt we are now teetering on the brink of an economic downturn after one of the longest bull-runs in history. 

Just under two-thirds of LPs in Preqin’s H1 2019 Alternative Asset Investor Outlook think we have reached the peak of the market.

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