Key Takeaways
- • Average private equity funds are trading at face value (100% of NAV), indicating a shift in secondary market dynamics for PE holdings as of October 2019.
- • Funds selling below NAV posted an average discount of 91% for the six-month period ended September 30, 2019, compared to 92% for the prior six-month period, suggesting modest tightening in discount valuations.
- • The movement toward face-value pricing reflects changing market conditions and investor sentiment in the private equity secondary market during this period.
Summary
According to a survey published in October 2019, the average private equity fund is trading at face value, representing a significant development in the secondary market for private equity interests. The data captures pricing dynamics as of the six-month period ended September 30, 2019.
The survey reveals that funds trading below 100% of net asset value (NAV) carried an average discount of 91% during the six months ended September 30, compared to 92% recorded in the prior six-month period. This one-percentage-point improvement in discount valuations suggests a modestly tightening market for secondary PE fund sales during this timeframe.
The shift toward face-value pricing has important implications for institutional investors, pension funds, and family offices managing private equity allocations. When funds trade at or near NAV rather than at significant discounts, it typically signals stronger demand for secondary holdings and potentially more disciplined pricing in the secondary market. This contrasts with periods of market stress or reduced appetite, when discounts to NAV typically widen substantially.
The timing of this survey—mid-October 2019—captures a period of relative stability in alternative asset markets, prior to significant volatility in subsequent quarters. For institutions managing PE portfolios, face-value pricing on secondary sales provides more favorable exit opportunities compared to historical periods when deeper discounts were prevalent. This metric serves as a barometer for the health and liquidity conditions in the private equity secondary market.
The survey reveals that funds trading below 100% of net asset value (NAV) carried an average discount of 91% during the six months ended September 30, compared to 92% recorded in the prior six-month period. This one-percentage-point improvement in discount valuations suggests a modestly tightening market for secondary PE fund sales during this timeframe.
The shift toward face-value pricing has important implications for institutional investors, pension funds, and family offices managing private equity allocations. When funds trade at or near NAV rather than at significant discounts, it typically signals stronger demand for secondary holdings and potentially more disciplined pricing in the secondary market. This contrasts with periods of market stress or reduced appetite, when discounts to NAV typically widen substantially.
The timing of this survey—mid-October 2019—captures a period of relative stability in alternative asset markets, prior to significant volatility in subsequent quarters. For institutions managing PE portfolios, face-value pricing on secondary sales provides more favorable exit opportunities compared to historical periods when deeper discounts were prevalent. This metric serves as a barometer for the health and liquidity conditions in the private equity secondary market.
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