Statistics- Secondary Markets
Source: https://www.pinebridge.com/en/insights/could-the-private-equity-secondary-market-triple-in-5-years
By 2023, private equity funds worldwide held over $10 trillion of net asset value (NAV) on their balance sheets. The chart above shows that the growth in secondary market transactions is closely linked to the increase in the value of private equity assets. This suggests that the value of secondary transactions could triple over the next seven years, going from $114 billion in 2023 to $417 billion in 2030. While this increase seems significant, it aligns with the overall growth in private equity since 2018.
Despite a lot of financial and geopolitical uncertainty, the secondary market had its second busiest year ever, with $114 billion in closed transactions. This was an 11% increase from $103 billion in 2022. In comparison, the overall Global M&A market and sponsor-backed M&A market saw declines of 18% and 3%, respectively. Investors are turning to the secondary market to find liquidity in a slow distribution environment. We estimate that over $200 billion worth of potential sales were considered in 2023, compared to the $114 billion that actually closed.
The image showcases the robust growth of the private equity secondary market from 2016 to 2023, with a 17% CAGR over these years. While LP-led transactions have traditionally dominated the market, GP-led transactions have gained significant traction, especially in recent years, indicating a diversification in secondary market activities.
The image presents the Median Net Internal Rate of Return (IRR) for private capital and secondary transactions by vintage year (the year a fund was established or began making investments). The graph tracks performance from 2007 through 2020 and highlights the excess return generated by secondary market investments compared to the broader private capital market.
Investors, on average, receive higher annualized returns from these secondary transactions compared to the broader market of private capital investments. This is largely due to the nature of secondary investments, which involve buying into more mature, de-risked assets at potentially discounted prices, leading to more favorable outcomes for investors.
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