Secondary Bids Resilient in Private Equity Funds,
Despite Stock Market Volatility in the 1H2022
Secondary Private Equity Market Commentary
by Laurence G. Allen
The 1st half of 2022 has been a tale of two markets: listed stocks vs. the secondary markets for private equity funds.
For listed stocks, the CBOE stock market daily volatility index increased approximately 98% to a high of 34.7 in May 2022 vs. 17.5 in December 2021, while the NASDAQ Composite Index declined approximately 22.2% through June 6, 2022.
In the secondary markets for private equity funds, NYPPEX secondary bid indications remained resilient generally in the first half of 2022, driven by a record amount of dry powder held by secondary private equity funds and a shortage of secondary deal flow.
Of course there were some fund strategies and transaction profiles that experienced significantly lower bids, such as venture funds with big write downs and highly leveraged commercial real estate funds with investments in older buildings in secondary locations.
NYPPEX estimates that secondary private equity funds worldwide held in excess of $140 billion in dry powder as of December 31, 2021. For perspective, 5 years ago, NYPPEX estimates that secondary private equity funds held dry powder of approximately $65 billion as of December 31, 2016.
For the 2nd half of 2022, NYPPEX projects a significant increase in secondary transaction volume in private funds, driven by both investors seeking to rebalance portfolios (denominator effect) and GP-led transactions (as funds seek exits while the IPO market remains dormant).
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Disclosure: This information is market commentary by NYPPEX Holdings and not a solicitation of private securities transactions which may only be done through private offering documents and in jurisdictions where permitted. Investors should not rely on the information in this commentary as the basis for making investment decisions. This commentary is provided for informational purposes only. You are strongly encouraged to consult with your own independent advisors regarding any issues discussed in this commentary.
Private placements are illiquid, speculative and investors may lose their entire investment.
About NYPPEX Holdings
NYPPEX Holdings is one of the world’s leading providers of secondary liquidity and data services for interests in alternative funds. Its clients include alternative investment funds, financial institutions, endowments, foundations, institutional investors, family offices, private clients and their respective advisors worldwide.
Since 2004, the NYPPEX QMS™ has been formerly recognized by the U.S. Internal Revenue Service as a Qualified Matching Service for private partnerships though a private letter ruling under internal Revenue Code §1.7704. The NYPPEX QMS assists private equity funds meet the requirements of a QMS safe-harbor exemption under IRS §1.7704, which helps ensure regulatory compliance and avoid an adverse taxable event when permitting higher volumes of secondary interest transfers annually.
Its private securities are privately offered to qualified investors through NYPPEX, LLC. NYPPEX is regulated in the U.S. by the SEC and FINRA. Member FINRA, SPIC.
About Laurence G. Allen
Laurence Allen serves as the Managing Member of NYPPEX Holdings, LLC. Since 1999, he has helped pioneer the development of secondary markets in private equity funds and private companies.
He has been a speaker at numerous private equity conferences worldwide, including the Institutional Limited Partners Association Spring Conference (Miami), Super Return Middle East Conference (Abu Dhabi), Dow Jones Private Equity Outlook Conference (New York), World Exchange Congress Conference (Barcelona), Private Company Stock Conference (Palo Alto), and Asian Venture Capital & Private Equity Conference (Hong Kong).
Mr. Allen has served on numerous boards including the Wharton School, Bowery Mission and the U.S. Congress Business Council. His diverse philanthropic activities have included the Metropolitan Museum of Art, Boys and Girls Club of Greenwich and Ducks Unlimited which presented him a Lifetime Achievement Award.
Prior to founding NYPPEX, Mr. Allen served in various positions with Merrill Lynch where he helped pioneer the development of secondary markets for commercial and residential mortgages. At Bear Stearns, he helped develop the secondary markets for private placements. Mr. Allen received a BS in Economics and MBA in Finance from the Wharton School at the University of Pennsylvania.