Could the Private Equity Secondary Market Triple in Size in the Next Five Years?
Private equity secondary market transactions are executed as institutional investors seek immediate liquidity from assets that took years to accumulate – and signs are pointing to a big ramp-up in these deals over the next few years.
By 2023, private equity funds worldwide held over $10 trillion of net asset value (NAV) on their balance sheets.1 Starting in 2018, institutional investment in private companies accelerated despite having grown at an impressive 14.2% compound annual growth rate (CAGR) since 2000, according to Preqin. For the past five years, the CAGR has been 20.3%.1
According to PineBridge research, the average time between the initial (primary) investment and secondary sales is seven years. Secondary buyers are just starting to acquire portfolios completed a few years ago, when the investment pace was speeding up. If this trend continues, the volume of secondary transactions will grow at a faster pace over the next few years.
The chart below highlights how projected secondary market volume neatly matches NAV growth offset by seven years. The implication is that the value of secondary transactions may triple over the next seven years, from $114 billion2 in 2023 to $417 billion in 2030. Although the rise in secondary sales is startling, it corresponds with the overall growth trends in private equity since 2018.
Investors in secondary transactions should take note, as the pace of growth suggests there will be ample opportunity to put capital to work in the years ahead.
Private Equity NAV Growth Signals a Ramp-up in Secondary Transactions
Source: Preqin database, Assets Under Management by Date, as of 22 January 2024; Greenhill Global Secondary Market Trends & Outlook, January 2020; Evercore FY 2023 Secondary Market Survey Results - Highlights, January 2024.
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