Valuation and risk trends in the secondary private equity markets for interests in private equity funds and shares in venture-backed private companies worldwide were the main topics for discussion during the recent NYPPEX Roundtable Webinar.
Guest speakers included Raj Marphatia, Partner, Ropes & Gray (Palo Alto, CA); Anthony Shontz, Managing Director, Partners Group (Denver, CO); Justin Burden, Managing Director, Industry Ventures (San Francisco, CA), Ricardo Miro-Quesada, Chief Investment Officer, Arcano Partners (Madrid, Spain); Fabrice Moyne, Partner, Mantra Investment Partners (Paris, France) and Jon Noble, Partner, Montgomery & Hansen (Menlo Park, CA).
The Webinar was moderated by Laurence Allen, Managing Member, NYPPEX Private Markets (Rye Brook, NY) and attended primarily by portfolio managers at financial institutions, pension funds, asset managers, insurance companies, endowments, foundations, family offices as well as executives from alternative investment firms and private companies worldwide.
“Historical data for the S&P 500 since 1964 shows that 10-year annualised returns have averaged only 4.5 per cent when forward P/Es are 17.9x, today’s multiple. In general, our speakers agree that secondary private equity prices appear high in the 4Q2017 and we’re currently in a seller’s market,” said Laurence Allen, CEO, NYPPEX.
“In 2017, there has been a significant increase in secondary offerings from emerging market-based private equity funds, including GP-led transactions,” said Ricardo Miro-Quesada, CIO, Arcano.
Raj Marphatia, Partner, Ropes & Gray, noted that: “Given current high secondary prices and outlook uncertainty, purchase price deferrals in secondary sales of fund interests is a common mechanism to resolve price disputes.”
Anthony Shontz, Managing Director, Partners Group, pointed out that: “Secondary prices are likely to remain high into 2018, unless there is a macro event that corrects the markets.”
Laurence Allen, CEO, NYPPEX, said: “Unrealised value in older tail-end funds is increasingly being addressed by general partners and limited partners. Today, private equity funds aged 15+ years old comprise 26 per cent of private equity funds worldwide vs 16 per cent in 2013.”
Jon Noble, Partner, M&H, said: “Secondary direct deal structures in 2017 continue to include return-sharing formulas when there is disagreement on price,” while Fabrice Moyne, Partner, Mantra pointed out that: “In 2017, secondary transaction volume increased in niche sectors such as timber, life insurance settlements and emerging markets given their attractive risk/return profile.”
