Key Takeaways
- • Ardian acquired a $2.1 billion secondaries portfolio from CPP Investments, signaling renewed activity in the private equity fund stakes market after a subdued 2022.
- • Secondary market pricing improved significantly in 2023, with average transaction valuations reaching 84% of net asset value in the first half—a 6 percentage point increase from the second half of 2022, according to Jefferies analysis.
- • Bid-ask spreads have narrowed materially over the first three quarters of 2023, with material increases in seller participation, creating favorable conditions for portfolio transactions.
- • CPP Investments, managing C$576 billion in assets with C$147.5 billion allocated to private equity, has executed seven secondary deals over the past five years, positioning itself as both an active buyer and seller in the market.
- • Dry powder in the secondaries market has accumulated to approximately $220 billion, providing substantial capital availability for acquiring fund stakes and supporting transaction volume growth.
Summary
The secondary market for private equity fund interests is showing renewed momentum following a period of market stress, with Ardian's $2.1 billion acquisition from Canada Pension Plan Investment Board (CPP Investments) serving as a bellwether transaction. According to Dushy Sivanithy, head of secondaries at CPP Investments, market conditions have improved substantially over the past three to six months, reversing the compressed valuations and minimal transaction volume that characterized 2022.
Pricing metrics underscore this recovery. A Jefferies analysis of the secondary market in the first half of 2023 found that average pricing for transactions reached 84 percent of net asset value, representing a meaningful 6 percentage point increase compared to the second half of 2022. More broadly, bid-ask spreads—which had expanded significantly in 2022—have narrowed considerably throughout 2023, while the number of active sellers in the market has increased materially. These dynamics have created a more balanced negotiating environment where buyers and sellers can reach agreement on pricing.
CPP Investments' position as both an active buyer and seller underscores the breadth of opportunity in the current market. The Canadian pension plan, which oversees C$576 billion in total assets, maintains C$147.5 billion in private equity holdings. Over the past five years, CPP Investments has completed seven secondary transactions of varying sizes. Recent examples include a US$100 million commitment to Oak Hill Capital Partners V and a US$50 million investment in ServiceTitan involving both equity financing and secondary elements. According to Sivanithy, the firm's active market participation allowed it to identify an optimal window for the recent Ardian sale, capitalizing on improving pricing conditions.
The secondary market's health is further reflected in the accumulation of dry powder—uninvested capital available for deployment—which has reached approximately $220 billion. This capital pool, combined with improved pricing and narrowed spreads, suggests sustained activity and growing confidence among institutional investors in the secondary fund market. The CPP Investments-Ardian transaction exemplifies how leading institutional investors are actively rebalancing their private equity exposure while positioning for continued market participation.
Pricing metrics underscore this recovery. A Jefferies analysis of the secondary market in the first half of 2023 found that average pricing for transactions reached 84 percent of net asset value, representing a meaningful 6 percentage point increase compared to the second half of 2022. More broadly, bid-ask spreads—which had expanded significantly in 2022—have narrowed considerably throughout 2023, while the number of active sellers in the market has increased materially. These dynamics have created a more balanced negotiating environment where buyers and sellers can reach agreement on pricing.
CPP Investments' position as both an active buyer and seller underscores the breadth of opportunity in the current market. The Canadian pension plan, which oversees C$576 billion in total assets, maintains C$147.5 billion in private equity holdings. Over the past five years, CPP Investments has completed seven secondary transactions of varying sizes. Recent examples include a US$100 million commitment to Oak Hill Capital Partners V and a US$50 million investment in ServiceTitan involving both equity financing and secondary elements. According to Sivanithy, the firm's active market participation allowed it to identify an optimal window for the recent Ardian sale, capitalizing on improving pricing conditions.
The secondary market's health is further reflected in the accumulation of dry powder—uninvested capital available for deployment—which has reached approximately $220 billion. This capital pool, combined with improved pricing and narrowed spreads, suggests sustained activity and growing confidence among institutional investors in the secondary fund market. The CPP Investments-Ardian transaction exemplifies how leading institutional investors are actively rebalancing their private equity exposure while positioning for continued market participation.
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