Secondary fund managers expect rapid rebound, says Investec

Rebound

According to Investec’s latest secondaries research report, more than three-quarters, or 77 per cent, of secondary fund managers expect a return to 2018 deal flow levels within the next 12 months.

“The secondaries market continues to evolve and, while it has not escaped the effects of Covid-19, neither has it suffered the long-term impact some feared”, said Ian Wiese, head of secondaries at Investec.

“LPs haven’t faced the same liquidity crunch that they did after the global financial crisis, so they’ve been able to bide their time. As a result, there is a backlog of deals that we expect to progress throughout 2021 and beyond,” he added.

Single asset deals are becoming a popular option for GPs looking to hold onto their best assets, with two-thirds (67 per cent) of those surveyed indicating that they would consider deals with only one asset involved.

While three quarters -74 percent, up from 50 per cent in 2019- say this in the context of GP-led transactions, the trend has extended into the world of LP portfolio sales, with 68 percent indicating they would consider deals representing only a single LP position.

And while involvement in preferred equity solutions was largely seen as a niche activity for managers in the secondaries market a decade ago, this year, only three managers were not participating in this area, with all of the respondents in Investec's survey saying they expect to become active in the next 12 months.

Overall, more than two-thirds of those surveyed anticipate further growth in GP-led solutions, and just 3 per cent expect activity to decrease. This represents a large part of all secondary market activity: 86 per cent of respondents participate in GP-led solutions, and GP-led activity accounts for 39 per cent of participants’ total activity. One-third of those that do not participate in this area at the moment expect to do so within 12 months.