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Jan 19, 2023 - Economy & Business

Blackstone's record PE secondaries fund sets up another big year

Dan Primack
Illustration of hands pointing at one another, collaged with money elements.

Illustration: Shoshana Gordon/Axios

The private equity secondaries market is out of balance, with significantly more supply than demand. But the gap is beginning to shrink.

Driving the news: Blackstone announced that it's raised $22.2 billion for its ninth global PE secondaries fund. That's a record-breaker, and twice what it raised for a predecessor fund in 2011.

  • The firm also announced $2.7 billion for a new GP-led continuation fund strategy.
  • Elsewhere, Spain's Arcano Asset Management announced €450 million for its 14th PE secondaries fund (topping a €300 million target). Plus, Moelis & Co. poached PE secondaries boss Skip Fahrholz from UBS.

The big picture: Active portfolio management also has become popular among limited partners. For example, many LPs now seek to offload older fund positions so they can focus on newer managers and/or funds. Particularly if there's been a change in the CIO office.

  • Moreover, many limited partners currently find themselves overallocated to private equity.
  • One major driver is the denominator effect caused by falling public equity and real estate values. Another is the IPO winter, which has led to longer hold times, less portfolio liquidity, and rapid growth of continuation funds.

By the numbers: Global PE secondary volume hit $108 billion in 2022, according to Jefferies. That fell a short of 2021, but still was the second most of all-time.

  • 52% of the 2022 volume was LP portfolios, representing a larger market share than GP-led deals for the first time since 2019.
  • LP portfolio pricing discounts deepened by around 1,000 basis points between 2021 and 2022, with last year hitting around 81% of net asset value.

What they're saying: There's at least between $200 billion and $230 billion of demand out there, so we're very confident in our ability to deploy the capital," says Verdun Perry, global head of of Blackstone Strategic Partners. "We're seeing activity from LPs across the board, whether it be public pensions, insurance companies, sovereign wealth funds or family offices."

  • Perry adds that he expects 2023 volume to top 2022, although perhaps not 2021.
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