Setter Capital Secondary Market Estimates $49.3 Billion In 2014

Screenshot 2015-01-22 13.58.29New York (HedgeCo.Net) – 2014 marked the busiest year for the secondary market to date with an estimated $49.3 billion in completed transactions, according to the newly released Setter Capital Volume Report, which covers the secondary market for private equity, real estate, infrastructure and hedge funds for the full year 2014.

North American and Western European focused funds/directs accounted for the vast majority of assets purchased in 2014:

  • North America – $23.6 billion
  • Western Europe – $18.3 billion
  • Asia-Pacific – $4.8 billion

In terms of percentage, North American focused funds and direct investments accounted for 47.9% of total volume, Western European assets accounted for 37.1% and Asia Pacific focused funds/directs accounted for 10.0% of sales.

Year over year, volume increased 37% driven by new and incumbent buyers who optimistically and aggressively put money to work and the large number of sophisticated LPs who executed opportunistic sales.

The breadth and number of buyers continued to increase with total volume and activity of small and medium buyers becoming more significant. Large buyers, defined as those who deployed more than $1 billion, accounted for 59.8% of the market’s total volume in 2014, while mid-sized buyers accounted for roughly 34.9% of total volume and small buyers represented roughly 5.3%. Also driving the expansion of the secondary market was the number of buyers expanding their scope of interest into areas in which they were previously inactive.

Approximately 31% of buyers broadened their secondary focus in 2014 to include buying other alternative investment types (e.g. infrastructure, real estate, portfolios of direct,etc.).

  • There were a total of 1270 transactions in 2014, with an average size of approximately $37.7 million.
  • Although the number of transactions was roughly the same as in 2013, the average deal size increased
  • 34.6% year over year, reflecting the fact that more multi-hundred million / billion+ dollar transactions were completed in 2014.
  • The marked increase in large deals, the dominance of secondary funds (78.6% of total volume) and the increased market share of large buyers, all demonstrate that 2014 was a banner year for the large entrenched secondary players.
  • Transaction volume completed by large buyers was $29.5 billion, a 54.6%
    increase in volume year over year.
  • Pensions (28.4%) and banks (24.8%) were the most active sellers in 2014, and most buyers expect the trend to continue in 2015 with pensions increasing in proportion.
  • Approximately 56.9% ($28.1 billion) of total secondary volume involved an intermediary in 2014, either on the buy or sell-side as compared to an estimated $20.5 billion in 2013.

In 2015, buyers expect this heightened activity to continue, leading to another record year for the secondary market, with volume across all asset classes for the full year of 2015 estimated to be roughly $56.5 billion – a 14.5% increase over 2014. This increase is supported by an estimated 38.1% of buyers planning to broaden their secondary focus to include other alternative asset classes (e.g. infrastructure, real estate, portfolios of directs, etc.)

The data within the report was extrapolated from a 17 question survey in which 84 of the top 115 secondary buyers (60 secondary funds, 35 funds of funds, 10 hedge funds, 7 investment consultants, 2 pensions and 1 insurance company) participated.  The 84 survey respondents alone transacted on $41.5 billion of secondaries across the spectrum of alternatives in FY 2014.

Alex Akesson
Editor for
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