Getting ahead with private equity secondaries

Private equity secondaries investment is an important tool used today by many General Partners (private equity fund managers) to circumvent time and capital limitation. It has since become part and parcel of the private equity investment ecosystem.

Marathon race with one running group ahead of the other group, indicating that by investing in Secondaries means you’re joining the race mid-way

Private equity secondaries investing is not niche anymore

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    growth in transaction volumes¹ from USD 18b in 2007 to USD 111b in 2023.

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    capital overhang ratio² at record lows

    What are private equity secondaries?

    Private equity secondary buyer acts as liquidity provider to private equity investors who wish to sell their positions and do not have the time or desire to hold on to their investments until the end of the regular lifespan.

    Background to private equity investing

    Private equity offers investors exposure to companies that are not publicly traded.

    Investors not only benefit from gaining exposure to otherwise inaccessible, unquoted/privately owned companies, but also from the skill sets that fund managers bring to bear to improve a company’s long-term value.

    Investors’ capital is typically pooled in strategy-specific, closed-ended funds and could have a fixed lifespan of 10 years or more.

    While this setup allows the private equity fund managers, also referred to as the General Partners (GPs), to take a long-term view on implementing value creation strategies in the underlying portfolio companies, it also has certain drawbacks.

    Most importantly for investors – or Limited Partners (LPs) – in private equity funds, there is no pre-defined liquidation mechanism.

    If an LP’s circumstances change over the 10-plus years of a private equity fund’s life, there is no pre-defined way out.

    This is where the private equity secondary market comes in: a private equity secondary buyer acts as liquidity provider to private equity investors who wish to sell their positions and do not have the time or desire to hold on to their investments until the end of the regular lifespan.

    3 reasons to invest

    1. Quick ramp up of exposure

    For new entrants to the asset class, the private equity secondaries market allows them to scale-up a diversified exposure three to five years faster.

    At the time of purchase, acquired positions are typically fully or close-to-fully invested and committed.

    2. Generate liquidity, but quicker

    Secondary-focused strategies, can generate liquidity much quicker than traditional multi-manager investment solutions.

    3. Purchase at a discount

    Secondary buyers often have the ability to buy positions at discounts to the reported net asset values leading to initial book gains at closing due to the transaction mechanics .

    Historical secondary pricing (as % of NAV)
    Source: Greenhill, Global Secondary Market Review, December 2023

    Historical secondary pricing (as % of NAV)

    These initial book gains help offset the so-called J-curve effect, a period of initial negative performance that is inherent in private equity.

    Why UBS-AM for private equity secondaries?

    UBS Asset Management (UBS-AM) has been managing open-ended, semi-liquid solutions in various asset classes since 2000s and is one of the most experienced operators of semi-liquid investment solutions globally.

    USD 14.1 billion

    invested and committed across various client mandates and products in Private Equity

    Since 2003

    Track record of investing in secondaries on an opportunistic basis


    For marketing and information purposes by UBS.

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    Source for all data and charts (if not indicated otherwise): UBS Asset Management (Singapore) Ltd. (UEN 199308367C )

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