Private equity funds have been trading above par in secondary markets, with a low supply of deals during the pandemic helping to drive up pricing, according to Palico.
Investors paid an average 101 cents on the dollar for stakes in private equity funds in the six months through November, Palico found in its survey of limited partners. Secondary investors were willing to bid above funds’ net asset value after raising record capital to put to work in a market where buying opportunities dried up this year.
“There’s been a huge amount of money raised” to buy fund stakes as investors such as pensions and endowments look to the secondary market to increase their allocations to private markets, Claire Woolston Commons, Palico’s head of strategy, said Monday by phone. Demand has outstripped the supply of stakes up for sale, with secondary trading volume expected to drop this year due to the uncertainties surrounding the value of private equity holdings in the pandemic, said Co