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Secondaries market insiders expect returns below 13 per cent and decline in pricing

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Senior secondaries practitioners expect to achieve pre-leverage returns of just 9-13 per cent on a deal-by-deal basis over the next three to five years, and anticipate a fall in pricing in the second half of 2015.

This is according to a poll of over 80 senior members of the secondaries industry, taken at the Secondaries Investor Forum in London on 1 July, 2015.

Despite this, secondaries insiders expect deal volume to remain relatively flat this year at between USD40 billion and USD45 billion. The findings are representative of a market dominated by high demand for a low number of desirable deals.

Other conclusions from the forum included an expected increase in the use of leverage on a deal by deal basis as buyers search for greater yield. Partners also expect GP-led and direct deals to continue their upward trend. These now represent approximately 30 per cent of the global market.

The secondaries market continues to be bifurcated with only a handful of buyers able to buy the largest portfolios of USD1 billion or more.  There has been little change in this group of secondaries buyers in the last decade but a multitude of new entrants has joined the lower and middle market.

The Secondaries Investor Forum was chaired by Sunaina Sinha (pictured), Managing Partner of Cebile Capital, the secondaries adviser and placement agent, who also chaired a panel discussion on the global outlook for the secondaries market. 

She says: “Secondaries deal flow has reached unprecedented levels, and we estimate that buyers have a further USD50-55 billion of dry powder. Returns are being affected as demand continues to outpace supply.”

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