Private Equity Secondaries Market Set to Break Record

As LPs look to sell-off certain interests in private equity funds as tougher times force them to rethink strategy, the sales of limited partnerships in private equity funds is expected to grow by 20% to a record $18bn this year, according to NYPPEX. This is in line with the overall growth being experienced by the secondaries as a whole. The secondaries market typically fairs better in difficult times and now is no exception. Many institutional investors are looking for some immediate returns to their portfolio investments in light of current market conditions.

Also, 84% of institutional investors are worried that GP strategy “drift” will effect their returns. The irony cannot be lost that often drift is a result from LPs increasing appetite for PE as an asset class. All the money LPs have given PE firms has to go somewhere.

Minority Stakes for Private Equity Firms All the Rage

Dealogic has reported that private equity firms have invested $12.4B so far this year in deals for minority ownership, a 58% rise from the year before.  While this practice has typically been more common in Europe than elsewhere, this trend is certain to continue on a global scale into the foreseeable future until debt markets loosen up.