ALTERNATIVES

Prices rise for buyout interests in secondary market in Q2 — NYPPEX

High bid prices for buyout fund limited partnership interests on the secondary market were 102.31% of net asset value at the end of the second quarter, up from 101.19% in the first quarter and 100.48% in the second quarter of 2015, secondary market brokerage firm NYPPEX estimates.

Prices were up because of better than expected net asset values, a NYPPEX report said.

However, NYPPEX executives predict secondary bids are likely to decline 3.5% or greater in the second half of 2016.

Buyers are concerned with lower gains at exits from alternative investments and with cash distributions that are 25% to 70% less than those in the second half of 2015, Laurence G. Allen, managing member and CEO of NYPPEX, said in an e-mail.

Secondary transfer volume in limited partnership interests worldwide was about $15.7 billion year-to-date through June 30, down 22.7% from $20.3 billion in the same period of 2015, according to NYPPEX estimates.

European alternative investment secondary prices already are being hit by the U.K.'s referendum to exit the European Union, Mr. Allen said.

“Secondary prices were already declining for euro-denominated private equity funds due to economic growth uncertainty,” he said.

“Brexit made things worse for institutions holding U.K. and euro-denominated private equity funds.”

For example, NYPPEX estimates U.K. real estate private equity funds have dropped 12% to 17% in net asset values since the June 23 Brexit vote, as banks, law firms and other commercial tenants are expected to move from London, which will cause higher vacancy rates in offices, Mr. Allen added.