In 2022, the secondary market for private equity funds experienced a surge in transaction volumes as buyout executives sought liquidity in a challenging market environment. Ardian, headquartered in Paris, announced a groundbreaking achievement by raising $30 billion, indicating a growing industry trend of extending investment holdings. Secondary managers acquire private equity assets from investors seeking quicker returns than fund managers can provide.
Ardian, along with other industry players, is increasingly turning to continuation funds to retain high-performing assets or manage difficult divestitures. The rise in continuation funds has been substantial over the past five years, as reported by Bain & Company.
Greg Ciesielski from HarbourVest remarked on the prevalent strategy among private equity firms to prolong their asset ownership. Last year witnessed secondary market deal volumes exceeding $150 billion, surpassing the previous year's record. Ardian's impressive fundraising surpassed the former record set in 2023 by $7 billion, per Preqin data.
Vladimir Colas, Co-Head of Secondaries & Primaries at Ardian, predicted a steady influx of sellers offering portfolios in the upcoming years. Despite a dip in secondary fundraising from the prior year’s peak, the sector remained active, with a few managers aiming to raise substantial funds.
Marion Cossin, leading Lazard’s secondary advisory team in Paris, highlighted how limited partners are opting to offload investments in the secondary market to secure liquidity amidst low distribution rates from private equity funds. The flow of capital into the secondary market has led to tighter margins for purchasing investments, affecting returns.
Analyst Victoria Chernykh of Preqin outlined a diminishing investor interest in secondaries due to comparable returns with traditional buyouts and concerns over fees. The evolving market dynamics are shaping a more competitive environment for secondary transactions, reflecting the evolving landscape for private equity investments.