Investors offload record volume of private equity stakes in 2024

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Investors unloaded a record number of private equity stakes on second-hand markets last year, as a prolonged dealmaking drought encouraged pension funds and buyout groups to look for other ways to cash in on their investments.

Worldwide volumes reached $162 billion in the so-called secondary market, where investors in private equity or other private funds sell their stakes to new investors or the fund managers themselves sell for new funds.

The total is up 45 percent from last year and more than 20 percent higher than the previous peak in 2021, according to an analysis by investment bank eff epheria.

Secondary deals have flourished in recent years as private equity firms scramble to invest through IPOs or sales at sufficiently attractive valuations to lead to cash distributions on the backs of funds.

Investors of the fund. “Limited Partners” or LPS – Instead turned to the secondary markets to try to find buyers for their stakes, while fund managers, “General Partners”, or GPS, cash in on their investments.

“Last year’s record secondary volume was driven by sustained lows [cash] Distributions at a time when many LPs were impatient for liquidity,” said Scott Beckelman, Global Co-President of Secondary Advisory at eff efery.

Two limited partners. Often institutions, such as pension funds, endowments or sovereign wealth investors, and general partners registered records in the secondary market last year, according to Jefferies.

Limited partners sold $87 billion worth of fund shares in 2021. to private equity.

Investors in the funds typically sell their stakes at a discount, but the eff said the asset value was down 6 percentage points last year, down from 9 percentage points the previous year.

Effiers said the price hike signaled confidence that private equity managers will soon be able to sell underlying portfolio companies as Wall Street prepares for the end of a rally.

The takeover measures have been at loggerheads in recent years with muscular antitrust regulators in both Europe and the U.S. However, a changing of the guard at key competition authorities in the U.S., EU and U.K. could serve as a prelude to mergers and acquisitions.

Prices of stakes in private debt funds rose more sharply than those in buyout vehicles – 77 percent of the value of assets – 91 percent after the launch of new facilities to buy second-hand funds in private debt funds.

Real estate and venture capital pricing remained slightly more depressed, at 72 percent and 75 percent of the value of the underlying assets, respectively.

“You have so much reason to say the following LPS.

Private equity firms have also turned to secondary markets, with total partners selling 75 billion in assets in 2024, up 44 percent from last year.

The vast majority of that, $63 billion, came from those managers selling their funds from more than one new fund of the same firm through a so-called continuing vehicle.

Continuing vehicles have become a popular option for private equity firms to return money to investors in a single fund without finding a buyer for the entire portfolio company, particularly where such a sale may not achieve a favorable valuation for the manager.

All three of the roughly 30 exit events at the European private equity firm last year involved transfers of reserves between EQT Funds, a person familiar with the matter said, although all three brought in outside investors.