Within the private equity market, secondaries deal flows are expected to increase as public and private market valuations come closer together, according to research firm Preqin's latest quarterly update.
However, the slight recovery of global public markets in the first quarter relieved some of the pressure by better linking public and private valuations, according to the update. Disconnect between public and private valuations can make completing deals in the secondaries market more challenging. This leads to a glut of limited partners interests coming to the market that are more likely to result in closed deals, which should encourage higher deal volumes.
Preqin said in the update that this comes at a good time, as investors have become more eager to commit to secondaries strategies. In the first quarter, 11 secondaries funds closed at a total of $32.5 billion, exceeding the entire total of 2022, which saw $31.4 billion in total volume by 40 secondaries funds.
Preqin does note that the first-quarter number was significantly boosted by the final close of Blackstone's Strategic Partners IX that closed at $22 billion.
In the overall private equity market, 102 funds closed in the first quarter at a total of $104 billion in North America, while 25 funds closed at a total of $40.5 billion in Europe, and 11 funds at $1.8 billion in Asia-Pacific.
As of March 31, global private equity assets under management reached $5.2 trillion, while dry powder totaled $1.54 trillion, about 29.5% of total AUM, according to the update. That falls slightly below the average of 32.4% of AUM between 2011 and 2021.
"Global public equity AUM climbed higher in Q1 2023 as receding recessionary risks outweighed emerging risks in the banking sector. Overall, private equity activity continued to slow compared to a high base of activity last year," said Cameron Joyce, senior vice president, research insights, at Preqin in a news release Friday. "That said, deal activity held up comparatively well as managers continued to deploy ample levels of dry powder."
Also as of March 31, there are 3,760 private equity funds looking to raise a total of $1.3 trillion.