Private equity secondaries remain in high demand, survey by Montana Capital Partners findsPrivateequitysecondariesremaininhighdemand,surveybyMontanaCapitalPartnersfinds

Indeed, private equity investors seem to be optimistic about the performance of the asset class going forward. While more than half of respondents had expected multiples to decrease in 2023, this year 3 out of 4 investors (74%) believe private equity multiples will remain at current levels or trend higher, potentially supported by easing recession fears and supportive interest rate movements.

In terms of fund structures, more than one-third (35%) of investors prefer investing in generalist secondaries funds, allowing them to capture the benefits of both GP-led and LP-led transactions within the same fund, while only 1 in 5 (19%) respondents prefer specialist funds (LP- or GP-led) and the remaining investors not showing a clear preference. At the same time, specialisation of investment teams around either transaction type was identified as key priority when selecting secondaries firms.

Eduard Lemle, Managing Partner and CIO at mcp, added: “Allocations to secondaries are increasing as investors recognise the strategy’s appeal in the current market environment. We at Montana Capital Partners follow a balanced approach of investing in both GP-led and LP-led transactions in the mid-market segment, which enables us to select attractive opportunities regardless of deal type — a strategy that also appears to resonate well with respondents in our survey.”

In terms of sectors, investors continue to favor software and technology, healthcare, and business services with 68%, 67% and 62% of investors assigning it the most attractive risk/reward profiles, compared to 68%, 64% and 45%, respectively, in 2023. Notably, financial services are gaining momentum and are now favored by 25% of investors, compared to 18% in 2023.

When it comes to artificial intelligence, more than 1 in 4 investors (26%) expect portfolio companies to reap the greatest benefits, while nearly 3 out of 10 (28%) feel it is still too early to tell which aspect will experience the strongest benefit.

When asked about their main concern regarding market activity over the next 12 months, geopolitical tensions were identified by 41% (2023: 15%), followed by inflated private equity valuations (25% vs. 21% in 2023) and an economic recession (22% vs. 32% in 2023).

ABOUT THE MCP ANNUAL INVESTOR SURVEY

The 2024 Annual Investor Survey represents the 12th edition of a successful series of yearly studies on the global private equity market conducted by Montana Capital Partners. It is based on two parts: an online survey of more than 100 of the industry’s leading family offices and institutional investors worldwide during the month of September 2024; furthermore, a subset of these investors was interviewed in depth to provide further insights into the results. Throughout the report, family offices, foundations, and endowments are classified as “family offices and foundations”. Investors from banks, asset managers, pension funds, and insurance companies are classified as “institutional investors”. The full report can be accessed via the microsite for the Annual Investor Survey.

ABOUT MCP

Montana Capital Partners AG (“mcp”) is an established global private equity secondaries investment manager with a focus on the mid-market. As an adviser or a delegated portfolio manager to six funds, i. e. the Opportunity Secondary Program, mcp (together with its affiliates) manages total assets of €3.7 billion (US$3.9 billion) for its investors.¹

mcp pursues a differentiated investment approach providing customised liquidity solutions in the secondary mid-market with a focus on proactive sourcing and a balanced portfolio construction across GP-led and LP-led transactions. mcp employs more than 40 professionals and has invested in more than 130 transactions since its inception.

Since 2021, mcp has been part of PGIM, the global investment management business of Prudential Financial, Inc. (NYSE: PRU) with US$1.4 trillion in assets under management,² benefitting from its combined market positioning and global footprint. For more information visit mcp.eu.

ABOUT PGIM

PGIM, is the global asset management business of Prudential Financial, Inc. (NYSE: PRU).   In 42 offices across 19 countries, our more than 1,400 investment professionals serve both retail and institutional clients around the world.

As a leading global asset manager, with US$1.4 trillion in assets under management,² PGIM is built on a foundation of strength, stability, and disciplined risk management. Our multi-affiliate model allows us to deliver specialised expertise across key asset classes with a focused investment approach. This gives our clients a diversified suite of investment strategies and solutions with global depth and scale across public and private asset classes, including fixed income, equities, real estate, private credit, and other alternatives. For more information, visit pgim.com.

Prudential Financial, Inc. (PFI) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom, or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. For more information please visit news.prudential.com.

¹ As of 30 June 2024. Figure includes funds raised per 31 Oct. 2024.
² As of 30 Sept. 2024

For media use only. All investments involve risk, including the possible loss of capital.

These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services and should not be used as the basis for any investment decision. No liability whatsoever is accepted for any loss (whether direct, indirect, or consequential) that may arise from any use of the information contained in or derived from this report.

Past performance is not a guarantee or reliable indicator of future results. Performance is defined as outperformance (net of fees) relative to each individual strategy’s respective benchmark(s). Net performance reflects the deduction of investment advisory fees and other expenses incurred in the management of advisory accounts. Performance fees vary across the PGIM businesses and reduce an investor’s net return.

The opinions expressed in this article are those of the author and do not reflect the views or opinions of PGIM, Inc. PGIM, Inc. is not responsible, endorses or confirms its accuracy. All trademarks and other intellectual property used or displayed are the ownership of their respective owners. Unless noted otherwise in this article, PGIM, Inc. is not affiliated with, nor it endorses any mentioned company or any linked third-party content.

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In the United Kingdom, information is issued by PGIM Private Alternatives (UK) Limited with registered office: Grand Buildings, 1-3 Strand,  Trafalgar Square, London, WC2N 5HR. PGIM Private Alternatives (UK) Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 181389). These materials are issued by PGIM Private Alternatives (UK) Limited to persons who are professional clients as defined under the rules of the FCA. In the European Economic Area (“EEA”), information is issued by PGIM Luxembourg S.A. with registered office: 2, boulevard de la Foire, L1528 Luxembourg. PGIM Luxembourg S.A. is authorised  and regulated by the Commission de Surveillance du Secteur Financier in Luxembourg (registration number  A00001218) and operating on the basis of a European passport. In certain EEA countries, this information, where permitted, is presented by PGIM Limited in reliance of provisions, exemptions, or licenses available to PGIM Limited under the temporary permission arrangements following the exit of the United Kingdom from the European Union. PGIM Limited has its registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London WC2N 5HR. PGIM Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number: 193418). These materials are issued by PGIM Luxembourg S.A. and/or PGIM Limited to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II) and/or to persons who are professional clients as defined  under the rules of the FCA.