The great importance of Secondaries in Europe

PE secondaries are on the rise in Europe and are seen as an attractive option, according to market research firm Cerulli Associates.

Provided by the research of Cerulli, here are some reasons why:

• Diversification exposure: specially for new investors in PE, it can be efficient to create diversified exposure to diverse strategies, vintages and managers.
• Strategic move: buyer might purchase a LP position via secondary and at the same time commit to a new fund to mitigate J- curve on the commitment made.
• Return intensification: buyer can acquire old funds at a fair discount to net asset value.
• Risk mitigation: secondaries can be good to reduce risk with unfunded vehicles

As of June 2019, Cerulli analysis indicated that PE secondaries accounted for all but $14bn of the $137bn of European AUM

The study also highlighted  that improved access to data on underlying portfolios by integrating private company databases, business intelligence and a good network of GP relationships should make the market more efficient.

Source: Private Equity Wire

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