The global private equity secondary market shows the asset class at its most confidential. As a result, it is nigh on impossible to quantify exactly how much capital is flowing in and out of it. Few transactions ever make it into the news, mainly because sellers do not want them there. And one of the reasons why secondary fund investors rarely talk about – let alone critique – their competitors' investments is that they simply don't know much about them.
The market's secretive nature probably works in its favour: who is to say how secondaries overall have been performing to date? It is too early to tell, and for the time being, investors are having to give the secondary market the benefit of the doubt. (My sense is that for many of them, it has been a risk well worth taking.)
By definition, secondaries have a shorter, steeper J-curve than the primaries from which they derive. And as the first and second generation of dedicated secondary funds are reaching maturity, the veil over their performance is about to be lifted. This won't be a particularly public event. But for those in and of the secondary market, the picture will be clearer soon. It is certainly worth noting that several practitioners interviewed for this issue's cover story argued that a previously unknown species of secondary fund had now arrived on the scene – secondary funds that are losing money.
Needless to say, such an ultra-discreet environment makes for great reporting territory. David Snow and I enjoyed doing the research for this month's special section, and you can read about our findings from page 49. Be assured: the secondary market is going to get bigger and more influential still.
Enjoy the issue,
Philip BorelManaging Editor