6 February 2024

Could the Private Equity Secondary Market Triple in Size in the Next Five Years?

Authors:
Justin Pollack

Justin Pollack

Managing Director, Private Funds Group

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

Could-the-Private-Equity-Secondary-Market-Triple-in-Size-in-the-Next-Five-Years-chart

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.

Footnotes

1 Preqin database, Assets Under Management by Date, as of 22 January 2024

2 Evercore FY 2023 Secondary Market Survey Results - Highlights, January 2024

Disclosure

Investing involves risk, including possible loss of principal. The information presented herein is for illustrative purposes only and should not be considered reflective of any particular security, strategy, or investment product. It represents a general assessment of the markets at a specific time and is not a guarantee of future performance results or market movement. This material does not constitute investment, financial, legal, tax, or other advice; investment research or a product of any research department; an offer to sell, or the solicitation of an offer to purchase any security or interest in a fund; or a recommendation for any investment product or strategy. PineBridge Investments is not soliciting or recommending any action based on information in this document. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by other areas of PineBridge Investments, and are only for general informational purposes as of the date indicated. Views may be based on third-party data that has not been independently verified. PineBridge Investments does not approve of or endorse any republication of this material. You are solely responsible for deciding whether any investment product or strategy is appropriate for you based upon your investment goals, financial situation and tolerance for risk.

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