Monday Market Minute | Oct 3, 2022

PE secondary market activity surges as LPs seek liquidity in an illiquid environment

What Moved

The global PE secondary market posted record transaction volumes through Q3 2022, with Canadian institutional sellers among the most active participants. LP-led secondaries — where investors sell fund positions to secondary buyers — accounted for the bulk of activity, as the denominator effect and liquidity needs forced allocators to trim PE exposure. Discounts to NAV widened to 10-15% on average, with less desirable fund vintages trading at even steeper haircuts. GP-led continuation vehicles also surged as fund managers sought to hold onto quality assets beyond original fund life.

Why It Matters

The secondary market provided a critical pressure valve for the Canadian private markets ecosystem. For sellers, it offered liquidity — albeit at a discount — from positions that were otherwise locked up for years. For buyers, secondaries offered the opportunity to acquire diversified PE exposure at discounted valuations, effectively purchasing a seasoned portfolio with near-term cash flow visibility. HNW investors considering PE allocations for the first time found secondaries an attractive entry point.

Signal to Watch

Secondary pricing trends through Q4 — widening discounts would signal deepening stress among LP sellers and increasingly attractive opportunities for secondary buyers.

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