Weekly digest - December 01 2021

"While $100 billion looks like a big number, because 15 years ago it was $10 billion, it's still a small part of the overall industry. We have projections for $500 billion over the medium term," Francois Aguerre, head of origination at Coller Capital, told AVCJ last month in reference to secondary volume likely reaching $100 billion in 2021.
Yann Robard, a managing partner at Whitehorse Liquidity Partners, is even more bullish, plotting a course to $1 trillion in annual volumes by 2030.
"Break it down in terms of what that means from a private capital perspective, it's very small. Private capital has grown from $5 trillion globally in 2016 to $10 trillion in 2020. It has doubled in size, with an annual growth rate of 18%. Cut that growth rate to 10%, just to be conservative, that gets you to $16 trillion by 2025 and $25 trillion by 2030," Robard told the AVCJ Private Equity & Venture Forum.
"This year we are talking about the secondary market breaching $100 billion for the first time. But the secondary market is trading on 1% of the $10 trillion out there today. If that 1% grows to 4% over the next 10 years, 4% of $25 trillion is $1 trillion of annual secondary market volume."
This rise from 1% to 4% will be driven by growth in the GP-led space, LPs being more active in how they manage their portfolios, the GP stakes market blurring with the secondaries market, more capital from constituencies that tend to value liquidity, such as retail investors, and a general maturation of different private asset classes.
Asia accounts for a tiny percentage of global secondaries, yet Jeff Keay, a managing director at HarbourVest Partners, noted that the demand-supply mismatch "is even more pronounced in Asia" than globally, However, allowing investors to be selective can draw out syndication processes and necessitate more syndicate participants.

In the first three months of 2020, quarterly PE secondary sales in Asia outpaced trade sales for the first time in eight years. There were extenuating circumstances. The world was in the grip of COVID-19, strategic investors were spooked, and trade sales were at a post-global financial crisis low. Activity has rebounded, but it only surpassed pre-COVID levels in the third quarter of 2021, spurred by some big financial technology deals. The fourth quarter still has one month to run, but secondary sales are currently ahead of trade sales, on $5.9 billion versus $4.7 billion. The likes of Tricor Group and Icon Group move the needle, but there has been a steady stream of mid- to large-cap transactions, ranging from Nucleus Network to A Twosome Place.

All of the trends featured here were sourced from AVCJ's proprietary database, AVCJ Research, featuring comprehensive information on private equity deals, fundraises and exits.