'A buyer's market': What is behind the fanfare for private equity secondaries?

Ares and Ardian unpick the trend

Once a niche market, secondary private equity has become a more mature asset class and one of the few viable routes to liquidity for private equity funds, especially in a challenging M&A backdrop and dry IPO market.

With the FTSE 100 up less than 1% last year and the S&P 500 down 18%, according to data from MarketWatch, one constraint facing private equity investors, also known as limited partners (LP), is the so-called denominator effect, triggered by the decline in public asset valuations.  Because their holdings of private assets exceeded the allocations allowed under their mandates, some LPs have been forced to reduce their investments in private fund managers, or free up cash through secondary sales of their fund stakes. After a record year for secondary transactions in 2021 ($130bn), the ma...