Podcast: A record-breaking 2024 for secondaries & outlook for the remainder of 2025

00:00:35 – 00:00:53
Today I’m joined by three members of our investment team here in New York. Mike Acri, a Principal on our GP-led team. Daisy Huang, a Principal on our Limited Partner Opportunities team, which is a dedicated group within Coller focused on LP-leds. And Jonathan Leu, a Principal on our Credit Secondaries team.

00:00:54 – 00:01:04
2024 was a remarkable year for secondaries. The market reached an all-time high in transaction volume, making last year the most active on record. It’s an exciting time.

00:01:05 – 00:01:17
The industry is evolving with new market entrants, an influx of fresh capital from perpetual funds and increasingly innovative structures in both GP- and LP-leds, as well as structured secondary solutions.

00:01:18 – 00:01:27
I’m excited to be joined by my colleagues to talk about the forces that drove this unprecedented activity last year and forecast what may be in store for the rest of 2025.

00:01:28 – 00:01:39
Let’s start with the headline item. Secondaries deal volume reached a new zenith in 2024. Mike, why was last year such a big year? What were the major tailwinds fuelling market growth?

00:01:40 – 00:01:57
Yeah, last year was the busiest year on record. 2024 turned over about $160bn of transaction volume. It’s about a 40% increase over the prior year and a 23% increase versus the 2021 peak. So busy year all around.

00:01:58 – 00:02:08
The market forces – the tailwinds – are many of the same forces that have been driving the secondary market over the course of the last couple of years. It’s been a slow exit environment, right?

00:02:09 – 00:02:28
M&A market has been pretty slow. IPO market has been effectively shut. Cost of debt has gone up. And so there have been fewer dividend recaps across private markets. And so I think generally speaking, GPs and LPs are turning to the secondary market to unlock liquidity.

00:02:29 – 00:03:03
I think those forces, coupled with what was a more  benign macro environment, I think post-election people have a little bit more certainty on what policy will look like, and markets have somewhat stabilized,  and so that has allowed some of the buyers in the market to price with more certainty and narrow the bid ask gap in the market, which drives more sellers because more transactions are happening. So overall, I think both LP and GP deals increased in volume in 2024.

00:03:04 – 00:03:16
I think we’re pretty excited about where we sit today in terms of what’s still to come in 2025. Growth was also driven by new market entrants. We’d be remiss not to talk about perpetual funds from the retail channel and the capital they’ve raised in secondaries last year.

00:03:17 – 00:03:20
Daisy, what impact does this new capital flow make on the market?

00:03:21 – 00:03:35
So perpetual vehicles are definitely the topic du jour as of late in the secondaries market. To date, I think the numbers are something like $65b raised in the 40’ Act funds of the part of the perpetual market.

00:03:36 – 00:03:59
And I think the expectation is, that they’re going to be raising something like $2bn a month, which sounds like a pretty hefty number, but if you compare it to the transaction volume that Mike was just talking about, $160bn of secondaries volume, it is still a small part of that, but nevertheless a pretty meaningful part of it.

00:04:00 – 00:04:13
The 40’ Act funds and the perpetual vehicles are very appropriate for retail investors just because of the day one diversification they are receiving in the perpetual vehicles and then the mitigation of the J curve.

00:04:14 – 00:04:34
So it is a very attractive product for retail investors and then on the strategies that these perpetual vehicles are focused on, it tends to be more LP-led focused and the reason is because these are the types of strategies that generate early liquidity and the pace of deployment can be a little bit more managed.

00:04:35 – 00:04:51
What we have seen is that the growth of these vehicles have really targeted a specific part of the LP-led market, it tends to be more call it tail-end type funds that have more discount, more early cash back.

00:04:52 – 00:05:05
And we do have in some occasions seen those types of opportunities have very robust pricing. And so that is one of the impact of the perpetual vehicles and the 40 ‘Act funds.

00:05:06 – 00:05:10
So the secondary market is expanding but also getting more specialized. Jon, what are you seeing in this respect?

00:05:11 – 00:05:48
We’re seeing a lot there. The specialization is definitely a theme in the market as it continues to grow overall. For us, we’ve observed this specifically in credit, infrastructure, VC, real estate, to name a few. And we’re seeing not only increasing dedicated pools of capital, but also increasing dedicated teams and talent being brought to these specific areas of alts and for us, the reflection of that growing diversification in products sets if you will, has led to growing transaction volume dedicated to those spaces.

00:05:49 – 00:06:03
I would say over the last 12 months, the number of billion-dollar transactions on both GP-leds  and LP portfolios that are specific to any of these sub strategies, has been at quite an astronomical pace of growth.

00:06:04 – 00:06:25
And so we like to see that as the market matures and it normalizes and for us specifically, to credit and infrastructure, as we’ve observed, those two are just an example of two areas of secondaries where, the growth in those markets has outpaced broader secondary market growth overall.

00:06:26 – 00:06:51
We estimate credit and infra to have a CAGR over the last five years of roughly 17%, versus 13% for the overall market, which in itself is already the fastest growing area of alts, right? So this is a trend that we see and we like to see as a dedicated player in the space. And even within general secondaries overall, we’re seeing also the growth of dedicated strategies within that.

00:06:52 – 00:06:55
So, Mike, what were the biggest developments in the GP-led part of the market last year?

00:06:56 – 00:07:13
Yeah, the GP-led market continued to grow really rapidly last year. It’s now about half of the overall market. So it reached about $77bn of total GP-led volume last year. Specifically within GP-leds, single-asset GP-leds really continued to be the story.

00:07:14 – 00:07:41
That’s the growth engine of the GP-led market, growing 50% year over year. And when you think about the rationale for GP-led transactions and specifically single-asset GP-led transactions, one of the hardest things, if not the hardest things to do within private equity is to find a great asset and more and more, we’re finding that GPs want to hold on to their best assets for longer, rather than sell them on, or forego the next leg of growth.

00:07:42 – 00:08:06
And so there are notable increases in the number of single-asset transactions and in particular, increases in the number of billion-dollar single-asset CV transactions. And I think, some of the influx of new capital into the GP-led market, coupled with sponsors really using it as a tool, a portfolio management tool, will continue to drive growth in that market.

00:08:07 – 00:08:13
And so switching gears to the LP-led market, Daisy, were sellers active in 2024 and what were some of the biggest highlights from the year?

00:08:14 – 00:08:40
I think similar to Mike it has a very similar trend in the LP-led market, similar to the GP-led market in terms of the dollars of volume that we hit in 2024, which was an all-time high on the LP-led side of $87bn, which compares to the last time we hit a high, which was in 2021, a very robust macro environment, when it was something close to $70bn.

00:08:41 – 00:09:01
And so a very robust year for LP-leds, and that’s partially driven by improving pricing across the board, and that’s just better sentiment from a buyer perspective which has led to a lot more volume coming out to market and a lot of more deals getting done.

00:09:02 – 00:09:36
What we’re seeing is, the higher quality buyout funds are in the kind of the sweet spot of call it five to eight-ten years of vintage life have really improved in pricing, particularly focused on buyouts. We’re also seeing trends around the bigger ticket items, very similar to what Mike said about GP-leds, in the sense that there’s a lot more volume in that kind of $500m to $1bn size deals in 2024.

00:09:37 – 00:09:40
Thanks, Daisy. You mentioned pricing rebounded. Can you talk a little bit more about that?

00:09:41 – 00:10:03
Yeah. Pricing rebounded. I think generally it’s been a robust public market environment, particularly from a valuation perspective. And that’s really helped in in terms of having a lot more conviction from buyers in terms of transacting and then being able to buy portfolios.

00:10:04 – 00:10:29
So that’s one aspect of it. I think we mentioned a little bit about the perpetuals being an aspect of the capital availability, which in some aspects of the secondary market has in some occasions also been very helpful to pricing. I think Jon will talk about it more, but also we’re seeing improvements in pricing across credit and infrastructure funds and then gradually more of an improvement in venture secondary pricing as well.

00:10:30 – 00:10:34
Daisy, were there specific regions in the world where we saw more concentration in deal activity?

00:10:35 – 00:11:03
So we continue to see the most volume in North American funds, which make up about 60% or 70% of the volume. European funds about 35%. And then the rest of the world the remainder. And then each of these three continents, we saw large deal sizes in the range of $500m to $2bn from each of those regions. And so, continuing the trend from the last several years, demand for credit secondaries is at an all-time high in 2024.

00:11:04 – 00:11:06
Jon, what were the market dynamics like?

00:11:07 – 00:11:28
Look, as mentioned, the pacing of credit secondaries growth has significantly outpaced broader secondaries growth over the past year. This has brought about and attracted dedicated buyers and pools of capital who are really focused on the space. And that’s also brought about a lot of transaction volume and transaction volume growth. We expect this trend to continue.

00:11:29 – 00:12:02
And as it does, we expect pricing to become more efficient, as people sharpen their pencils and more capital be in the space. We’ve already seen it over the course of 2024, where pricing was at an all-time high for credit secondary focused transactions. And furthermore, while the market has traditionally been more LP focused in credit secondaries, we’re starting to see the prevalence of GP-led activity and GP-led transactions, as GPs themselves become educated on the space and potentially utilize it as a means of liquidity for their own LPs.

00:12:03 – 00:12:06
And Jon, how else do you expect the credit secondaries market to change in 2025?

00:12:07- 00:12:39
I think the theme is just going to be on continued rapid growth. When we first started really looking and digging into the space and creating a dedicated strategy seven years ago, the market size was roughly a trillion dollars in overall private and liquid (credit) secondaries. This market sizing has grown today to what we estimate to be over $4tr of capital that sits in both traditional drawdown vehicles as well as non-traditional vehicles that hold credit such as insurance and financial institution balance sheets and other sources of capital like BDCs.

00:12:40 – 00:13:09
And so for us, with that overall market growth, we should see the overall size of the pie growing. And so that’s on the potential supply side of things. And then on the other side, it is still very much an undercapitalized space. We like to say that credit secondaries is very much a cottage industry. We’re in the early stages. And so the amount of capital to address that potential volume is still growing. And we expect that to also continue to outpace broader alts growth over the course of the next year.

00:13:10 – 00:13:28
All of that brought together means that we expect there to be a huge amount of transaction volume over the course of 2025. And that will not only bring about different types of capital to address the space but also continue to evolve the types of transactions that get done in the market, whether it’s LP-led or GP-led.

00:13:29 – 00:13:35
So Mike, on the topic of what to expect for the rest of the year. What trends do you think will continue or change in the GP-led market?

00:13:36 – 00:13:52
I think there’s every reason to believe that the trends that we’ve seen over the last couple of years continue into 2025. I think the GP-led market grew 20% last year. I think that’s fuelled by a lot of the things we spoke about earlier, other exit opportunities being less viable.

00:13:53 – 00:14:10
And so GPs are looking to the secondary market to provide alternative sources of liquidity to their LPs. That coupled with the fact that they want to hold on to their star assets or their winners for longer, I think those two dynamics will continue to fuel growth in the secondary market for the foreseeable future.

00:14:11 – 00:14:27
I think the other important dynamic to understand or to note – 60% of CVs in 2024 were done by first time issuers. So it was the first time a GP was completing a CV. We’ve now seen and we’ve all worked with GPs across multiple transactions.

00:14:28 – 00:14:50
We tend to find that once a GP is leveraging the secondary market, it becomes part of their toolkit and so they become a repeat user. And so that influx of new entrants to the market and supply of deal flow should stand to reason that those groups will be a source of deal flow for the GP-led market, for 2025 and beyond.

00:14:51 – 00:14:56
So Daisy, just to complete the picture, what trends are you expecting in LP-led transactions for the remainder of the year?

00:14:57 – 00:15:25
Similar to what Mike said around the GP-led market, for the rest of this year we expect the LP-led market to continue to be robust. We expect it to be volume-wise in line, if not better than 2024 levels. And what we saw in 2024 was that a lot more sellers were coming to market, not just for liquidity needs but also active portfolio management. And so we expect that trend to continue to persist into the rest of this year.

00:15:26 – 00:15:44
Another trend we’re seeing is the expansion of the secondaries market into other asset classes like credit, like infrastructure, like real estate. And the broader uses of secondaries in those other strategies. And so that trend, we expect that to continue into the rest of this year.

00:15:45 – 00:15:58
And then finally, one of the things that we’re seeing is the recovery in secondaries pricing, will trickle down to venture and growth funds in the way that they have started to do kind of up until this point of the year.

00:15:59 – 00:16:02
So Jon, what’s the forecast for the credit secondary market?

00:16:03 – 00:16:22
We expect to see continued growth in the credit market  over this coming year. I think there’s been a solid trend, and it’s really not that hard to predict. I think odds would be in favour of that. The transaction volume in credit has grown every single year, over the course of the last seven years. And that is just by nature of a growing overall market.

00:16:23 – 00:16:42
We are in the early innings of a credit secondaries market, and it’s a long game and a long series.  And so we expect that to continue, going into 2025 and in the years beyond. With more buyers and sellers coming into this space at the same time, we think that creates a favourable dynamic for transactions get done.

00:16:43 – 00:17:04
And if you extrapolate that further with the commentary around GP-led and LP-led volumes over the coming year, we expect the overall market to have that favourable buyer-seller dynamic over the course of 2025. Of course, we don’t have a crystal ball that can predict it to a T. But I think it’s a safe bet for us to say that, over the next year, we expect growth in the overall secondaries market.

00:17:05 – 00:17:21
Thanks, Jon. So there you have it. There’s a lot to look forward to as the secondary market continues to grow and evolve rapidly. The market is seeing solid momentum. And both secondaries transaction activity and fundraising is expected to be robust as we continue into 2025.

00:17:22 – 00:17:27
I want to thank Mike, Daisy and Jon for their insights today  and from all of us here at Coller Capital, thank you for tuning in.