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PRIVATE EQUITY: SECONDARY MARKETS
Private equity secondary pricing was little changed in the second half of 2012,
with average high bids at approximately 80% of net asset value (NAV), which
represented a 20% discount to reported values. 1 Last year’s volume matched
the record set in 2011, with $25 billion of transactions closed.
Private Equity Secondary Bid Prices
Average High Bid
120%
100%
80%
60%
40%
% of NAV Private Equity Secondary Bid Prices
20%
0%
Source: Cogent Partners Secondary Pricing Trends and Analysis, January 2013
Source: Cogent Partners Secondary Pricing Trends and Analysis, January
Several trends emerged with respect to the types of assets sold in the
secondary market. In the buyout sector, funds raised during peak years (2005,
2006, and 2007) represented an estimated 60% of transaction volume over
the past three years. These funds are five years old on average. Conversely,
trading in venture capital funds has been concentrated in funds at or near the
end of their terms. Fundraising volume in venture peaked in 1999 and 2000,
and over the last three years, more than 40% of the venture funds marketed
by Cogent, a leading investment bank for secondary markets, were more than
ten years old at the time of sale.
Financial institutions and pensions remained the largest sellers of secondaries.
These investors drove most of the commitments during the peak fundraising
years of 2005 to 2007. Selling from banks slowed in the second half of 2012,
partly due to the rally in the public equity markets and delayed regulatory
action. Cogent estimates that banks are holding $70 billion of illiquid private
equity assets on a global basis, which serve as a potential pipeline for future
transactions.
Completed Completed Transactions in 2012
By Sellers (Transaction Value)
2%
2%
12%
21%
10%
24%
29%
Financial Institution
Public Pension
Corporate Pension
Fund of Funds
Family Office
Source: Cogent Partners Secondary Pricing Trends and Analysis,
Source: Cogent Partners Secondary Pricing Trends and
January 2013
Analysis January 2013
Page 10
FOURTH QUARTER 2012
Nathan C. Werner, CFA
Senior Vice President
“Last year’s volume
matched the record set
in 2011, with $25 billion
of transactions closed.”
© 2013 Fund Evaluation Group, LLC