Here Are the Private Equity Funds Winning the Secondary Market

According to secondary marketplace Palico, the industry has had a record year.


Private equity’s secondary market is booming, and assets are hitting record values, according to new data.

Palico, a secondary asset marketplace, released new figures on Thursday showing that the typical transaction on the secondary market is valued at 102.5 percent of net asset value in terms of mean, and 101 percent in terms of the median, according to a survey of limited partners who successfully bought stakes in closed funds over the past six months. According to Palico, this is the highest pricing the firm has seen since it started tracking secondary-market transactions in March 2017.

“It’s a culmination of an evolution in the marketplace,” said Palico spokesman David Lanchner by phone. “We have seen the secondary market utterly transform from a place that was a hunting ground for bottom fishers looking for distressed assets. Now it’s a much more vibrant, continuous marketplace.”

The growth of the private equity secondary marketplace is reflected in high asset prices, which Palico recorded during the past six months.

The highest-price asset purchased on Palico’s marketplace in the past six months was Sun Capital Partners VI, which has the vintage year of 2014. It sold for 126 percent of net asset value, the report shows.

Thomas H. Lee Equity Partners VII, which has the vintage year of 2016, came in second, selling for 120 percent of its net asset value, the report shows. TGP Growth III, with the vintage year of 2015, came in third, selling for 118 percent of net asset value.


Meanwhile, Waterland Private Equity VI and Hillhouse II, both of which have 2015 vintage years, sold for 115 percent of net asset value each, sharing the fourth spot on the list.

“Final tallies are not in, but early estimates forecast total volume for 2018 to reach or exceed $75 billion which far exceeds the previous year’s high of $58 billion,” according to the report.

Younger funds are more attractive to investors looking to buy on the secondary market, the data show. The funds selling at a premium have an average age of 5.1 years, as compared with the funds selling at a discount, which were on average 8.5 years old.

“The significantly younger age of funds selling at par or better versus those sold at discount is logical,” the report said. “Older funds typically have more limited upside than younger portfolios.”

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Investors are interested in buying from the secondary market because it minimizes their risk while preserving high returns, Lanchner said.

“Secondaries right now are showing lower risk and higher return,” he said. “Returns will probably come down in years to come, but they’ll still be quite healthy.”