Deal volume is set to increase on the secondary private equity market, with almost half of investors (48%) viewing it as of growing importance to their investment strategies and 7% saying it forms a core part of their strategies, according to a survey by alternatives services and research company Preqin.
Thirty percent of institutional investors are considering buying fund interests within the next 24 months, according to the Preqin survey released Monday.
Fundraising in the private equity secondary market reached a record-breaking $22.9 billion in 2009. With 40% of investors saying the secondary market is an important portfolio rebalancing tool for them, Preqin officials expect that the secondaries market will continue to play an “important role” in the private equity industry.
“The discrepancy between buyer and seller expectations of pricing on the secondary market has now narrowed, encouraging potential sellers, put off by pricing last year, to place portfolios of funds back up for sale in 2010,” Helen Kenyon, Preqin manager, investment data, said in a news release. “Furthermore, a considerable pool of capital is currently available for purchases on the secondary market: Low deal volume on the secondary market in 2009 has left a lot of investors with capital still to put to work, and new secondaries funds that closed in 2009 raised a record-breaking $22.9 billion. We anticipate this growth in activity on the secondary market will continue over the course of the year and into 2011.”
Ms. Kenyon could not be reached for further comment.