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Secondaries growth shows no signs of slowing down

We've been covering some of the predictions we made last year in PitchBook's

2019 Private Equity Outlook analyst note. On deck now is our all-time-high prediction for secondaries activity. We don't track secondaries transactions directly, so we based last year's forecast on retroactive contributions data.

Noting that "aggregate contributions and distributions from secondaries hit record highs in 2017," we predicted sustained momentum throughout 2018 and into 2019. Secondaries fund performance data indeed saw another record, with contributions hitting $32.6 billion in 2018 compared to $24.3 billion in 2017. Those numbers are as of March 31, the latest batch of performance numbers available to the market. Narrowing our definition to secondaries fund cash flows, our prediction turned out to be true, but it looks like others are seeing the same trend that we are.


Secondaries funds aren't the only buyers running around, and transactions are hard to aggregate, given the nature of the market. There are hundreds of other nontraditional buyers, including sovereign wealth funds and pensions, and getting a reliable temperature of transaction activity is tricky. Setter Capital produces one of the better

market reports on the subject, and they saw strong numbers earlier this year. Using a survey-based estimate, they pegged 1H 2019 secondaries activity at around $46 billion. They also said that figure was conservative, since it didn't include sovereign fund purchases.

Elsewhere in the survey, 54% of respondents "felt their volume was significantly higher" in 1H 2019 compared to 1H 2018. When we get the next batch of secondaries contributions data, the numbers might reflect that. It's worth noting that the secondaries funds have been levering to the tune of 45% this year, up from just 4% in 2013, according to Palico. The contributions data above doesn't reflect that leverage. It's a big market that's getting significantly bigger.

This column originally appeared in The Lead Left.

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