Key Takeaways
- • Ardian acquired a $2.1 billion portfolio of limited partnership interests in 20 buyout private equity funds from CPP Investments, signaling renewed activity in the secondaries market after a subdued 2022.
- • Secondary market pricing improved materially in 2023, with average transaction pricing 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 narrowed significantly over the first three quarters of 2023, driving a material increase in seller participation and transaction volumes after depressed activity in 2022.
- • CPP Investments, which manages C$576 billion in total assets and holds C$147.5 billion in private equity, has executed seven secondary deals over the past five years, positioning itself as both an active buyer and seller to capitalize on market timing opportunities.
- • Dry powder in the secondaries market has accumulated to approximately $220 billion, providing substantial capital ready for deployment as pricing conditions improve and deal flow accelerates.
Summary
The secondary market for private equity fund stakes is showing signs of renewed vigor following a challenging 2022, evidenced by Ardian's $2.1 billion acquisition of a portfolio of limited partnership interests from CPP Investments. The deal represents one of the more substantial secondary transactions to close recently and reflects broader market improvements that have unfolded across 2023.
Market conditions have shifted considerably since the end of 2022, when elevated bid-ask spreads and uncertainty depressed transaction volumes. According to Jefferies' analysis of first-half 2023 activity, average pricing for secondary transactions reached 84% of net asset value, representing a 6 percentage point improvement from the second half of 2022. This pricing recovery, combined with narrowing spreads, has directly increased the volume of sellers willing to enter the market. Dushy Sivanithy, head of secondaries at CPP Investments, attributed the improvement to developments "on multiple fronts in the last three to six months," with the narrowing bid-ask spread being the primary catalyst for renewed transaction activity.
CPP Investments, the Canadian pension plan overseeing C$576 billion in total assets with C$147.5 billion deployed in private equity, has positioned itself strategically within the secondary market as both a systematic buyer and seller. Over the past five years, the institution has completed seven secondary transactions of varying sizes. Recent acquisitions include a US$100 million commitment to Oak Hill Capital Partners V and a US$50 million investment in ServiceTitan via equity financing and a secondary component. This active market participation provided CPP Investments with the timing insight necessary to execute the recent sale at an attractive valuation window, according to Sivanithy.
The accumulation of dry powder in secondaries strategies has reached approximately $220 billion, providing substantial firepower for continued deployment as market conditions stabilize. The Ardian-CPP Investments transaction underscores a shift toward portfolio optimization among large institutions, as managers balance the rebalancing of their private equity exposure with the opportunity to deploy capital into attractively valued fund interests. This deal may signal the beginning of a more active secondary market period after the constraints that characterized 2022.
Market conditions have shifted considerably since the end of 2022, when elevated bid-ask spreads and uncertainty depressed transaction volumes. According to Jefferies' analysis of first-half 2023 activity, average pricing for secondary transactions reached 84% of net asset value, representing a 6 percentage point improvement from the second half of 2022. This pricing recovery, combined with narrowing spreads, has directly increased the volume of sellers willing to enter the market. Dushy Sivanithy, head of secondaries at CPP Investments, attributed the improvement to developments "on multiple fronts in the last three to six months," with the narrowing bid-ask spread being the primary catalyst for renewed transaction activity.
CPP Investments, the Canadian pension plan overseeing C$576 billion in total assets with C$147.5 billion deployed in private equity, has positioned itself strategically within the secondary market as both a systematic buyer and seller. Over the past five years, the institution has completed seven secondary transactions of varying sizes. Recent acquisitions include a US$100 million commitment to Oak Hill Capital Partners V and a US$50 million investment in ServiceTitan via equity financing and a secondary component. This active market participation provided CPP Investments with the timing insight necessary to execute the recent sale at an attractive valuation window, according to Sivanithy.
The accumulation of dry powder in secondaries strategies has reached approximately $220 billion, providing substantial firepower for continued deployment as market conditions stabilize. The Ardian-CPP Investments transaction underscores a shift toward portfolio optimization among large institutions, as managers balance the rebalancing of their private equity exposure with the opportunity to deploy capital into attractively valued fund interests. This deal may signal the beginning of a more active secondary market period after the constraints that characterized 2022.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.