PE exits and dealmaking both lag behind wider M&A activity by some distance this year. That means the plumbing and engineering behind the secondary market will be put under more pressure than ever.
Thankfully, this infrastructure seems to be on a steeply upward trajectory of sophistication – simultaneously a response to greater demand, and a ‘build it and they will come’ approach, as the market continues to trace a dichotomy between growing transaction volumes and lagging AUM.
Main challenges with democratisation
One factor, very much under the microscope right now with a direct bearing on both sides of the coin, is democratisation. It will expand private markets AUM, and secondaries as a result, while also bringing to market a bigger and wider range of investor interests.
It sounds good for secondaries. But if a robust engineering framework was essential before, it’s mission critical now. Frequency of valuations, the meeting of liquidity requirements, a lack of operational standardisation and overall complexity – challenges that are top of mind among our audience and very much manifesting in the headlines worldwide – will need addressing.
Role of AI in secondaries
A robust data infrastructure overlaid with AI is now a must. Firms are on this journey, though most are using AI for basic tasks still. On the flipside, the number of firms leveraging AI in any form has more than doubled since last year.
Progress in secondaries, catering to retail, is the embodiment of public private convergence, which will necessitate a similar level of sophistication.
Read all about it in our latest research.
