Our industry - Why does the secondaries market exist?

Why does the secondaries market exist?

All secondary markets are a natural consequence of large pools of capital. Investors’ situations and strategies change over time, creating a need for early liquidity. Commercial loans, mortgages and various types of insurance are some of the many areas in which active secondary markets have developed. Indeed, except in the relatively small part of their turnover represented by the issuance of new stocks and shares (IPOs and rights issues), all the world’s stock exchanges are secondary markets.


Private equity is an illiquid asset class, with investors required to commit capital to private equity funds for ten years or more. The development of a secondary market was therefore both necessary and inevitable.

Is boosting liquidity the only reason for investors to sell assets as secondaries?

Increased liquidity for the seller is certainly a consequence of all secondary sales, but it is often not the only, or even the principal, motivation.


Secondary sales have also been driven by investors’ increasingly active approach to managing their private equity portfolios.


This trend will continue and intensify, as LPs re-shape their holdings in response to new economic realities and focus more of their commitments on a core group of preferred managers.

Selected individual investments

History of secondaries


The first secondaries fund is raised in the US by VCFA. It has investor commitments of $6 million.


By the late 1980s a handful of secondaries funds exist – all less than $50m in size. Jeremy Coller completes Europe’s first secondaries transaction whilst working for ICI’s pension fund.


The largest secondaries fund, managed by Adams Street Partners, attracts commitments of £111m. Jeremy Coller leaves ICI’s pension fund to establish his own business.


Secondaries funds raise a total of $1.6 billion in the four years 1991-1994.


The secondaries market continues growing slowly but remains a localized phenomenon. Less than $3.6 billion is raised by secondaries funds in the seven years 1991-1997. All funds are national or regional in focus.


CIP II becomes the first global secondaries fund. Lexington Partners closes a $1.1bn fund. Coller Capital’s acquisition of a $265 million portfolio from Shell’s US Pension Trust becomes the largest secondaries investment of its time.


Coller Capital leads the acquisition of NatWest’s $1 billion plus private equity portfolio, following the bank’s takeover by Royal Bank of Scotland – by far the largest secondaries investment of its time. Total secondaries funds raised 1991-2000 amount to $10.4 billion.


Coller Capital makes the first significant direct (or synthetic) secondaries transaction, acquiring a corporate venture portfolio of 17 technology companies from Lucent’s celebrated Bell Labs.


Coller Capital closes CIP IV – at $2.6 billion, the largest secondaries fund of its time. Secondaries funds raise approximately $8bn during the two years to December 2002.


Largest secondaries investment to date – consortium (including Coller Capital) acquires a €1.5 billion portfolio from Deutsche Bank.


Largest un-syndicated secondaries investment of its time – Coller Capital acquires a $900 million portfolio from Abbey, the UK’s sixth largest bank. Secondary funds raise approximately $11bn during the two years to December 2004.


Around $8 billion of transactions take place in 2005 as investors become increasingly comfortable with secondaries and more proactive in managing their private equity portfolios. More investors buy as well as sell assets as secondaries.


Annual secondaries transactions exceed $10 billion. Coller Capital invests in ICIC Ventures’ India Advantage Fund I – India’s first secondaries transaction.


Coller Capital raises the largest secondaries fund of its time – CIP V closes at $4.8 billion. The volume of secondaries transactions exceeds $16 billion for the first time.


The volume of secondaries transactions drops slightly from $16.1 billion in 2007 to $15 billion as rapid fall in public markets leave PE overvalued on investors’ books. London Business School creates Coller Institute of Private Equity.


Market volatility in the wake of the Lehman Brothers crash leads to mismatched pricing expectations and low transaction volumes. This begins to change in the second half of 2009, as some stability returns to the markets. Secondaries bid-ask spreads converge significantly. Coller Capital completes the first secondaries acquisition of structured credit investments with Pearl Diver Capital. Coller Capital, in conjunction with HarbourVest and DFJ Esprit, acquires the majority of 3i’s remaining venture portfolio.


The volume of secondaries transactions exceeds $20 billion for the first time. Several major transactions feature banks as sellers. Coller Capital forms joint venture with Lloyds Banking Group to acquire the Bank of Scotland Integrated Finance portfolio.


The volume of secondaries transactions reaches $24 billion – a ten-fold increase on a decade earlier. Secondaries sales are taking place for two reasons: tactical sellers (pension plans and asset managers) are taking advantage of favourable pricing to re-shape their portfolios; while strategic sellers (banks and insurance companies) are amending their investments/business models in response to regulatory/capital pressures. Coller Capital acquires Credit Agricole Private Equity (CAPE) and the large majority of the funds CAPE manages.


Volume of secondaries transactions sets new record with $25 billion Secondaries sales continue to take place as tactical sellers (pension plans and asset managers) re-shape their portfolios, and strategic sellers (banks and insurance companies) respond to regulatory/capital pressures. CIP VI closes at $5.5 billion, ahead of its $5 billion target. Coller Capital agrees to fund the acquisition of a $1.9 billion private equity portfolio from Lloyds Banking Group – the market’s largest unsyndicated secondaries investment.


The secondaries market has a slow start in 2013, as rapidly rising public equity markets lead investors to postpone planned disposals. However, strong market fundamentals ensure momentum builds in the second half of the year. Coller Capital has its second busiest year ever, acquiring numerous ‘funds’ and ‘directs’ portfolios from North American and European investors.


Secondary market volumes leap to $40 billion as financial institutions comply with regulatory change. Coller Capital’s fund was the lead member of an investor group which established a new private equity fund to acquire a portfolio of assets from American Capital and provide capital for new investments.


GP-led liquidity solutions become a significant part of the secondary market. CIP VII closes at $7.15bn, ahead of its $5.5bn target. CIP VI was a lead investor in a transaction committing $645m to allow Irving Place Capital to reposition its 2006 vintage fund and establish a new investment vehicle.


The secondary market continues to evolve and diversify into new assets and areas. There is a rapid rise of various other markets tangential to the core secondary PE market with increasing pools of real estate, real assets, infrastructure and credit being bought and sold. CIP VII acquires a $257m portfolio of senior secured loans managed by Northport Capital. The team was spun out into CVC’s direct lending platform.


Private equity’s secondary market scaled new heights, buying and selling approximately $52 billion of assets – a 40% rise in volume over 2016. CIP VII notched up a record year, acquiring both LP positions and directs from sellers in North America, Europe and Asia. Investments included a number of GP-led secondary transactions.


Another bumper year for the secondary market, with global transactions leaping in volume to a record $72bn. CIP VII led the largest ever GP-led secondary transaction of its time, a liquidity offer for €2.2bn to Nordic Capital Investors – an investment voted European Secondary Deal of the Year by PEI readers. Coller Capital received the BVCA’s Responsible Investment Award for outstanding ESG practices with PE & VC.


The private equity secondaries market hit a new high, with transaction volume of $85bn. CIP VII closed several GP-led secondary transactions, partnering with Investcorp, BPEA and Revelstoke Capital Partners.


Private equity secondary transaction volume was impacted by the Covid-19 crisis early in the year, before rebounding, supported by GP-led transactions. CIP VIII closed GP-led transactions with Permira and TH Lee.


The private capital secondary market ended the year strongly, with global transaction volume reaching a new high of $130bn. CIP VIII (incl co-investment vehicles) closed at $9bn. Coller led the world’s largest private credit secondary transaction – for a $680 million portfolio managed by Ping An Overseas Holdings.


The private capital secondary market continues to diversify, with strong growth forecast beyond the core PE segment. Coller closed the world’s largest private credit secondaries fund, CCO I, at $1.45bn (including co-investment vehicles).


The private capital market opens to the widest possible range of investors across the globe. Coller Capital establishes Private Wealth Secondaries Solutions, a dedicated team to serve high-net-worth investors.