PE secondary deals seen picking up

NEW YORK Mon Mar 1, 2010 6:53pm EST

Jean-Marc Cuvilly (L) and Jeremie Le Febvre, partners with Triago, speak at the Reuters Private Equity and Hedge Funds Summit in New York, March 1, 2010. REUTERS/Brendan McDermid

Jean-Marc Cuvilly (L) and Jeremie Le Febvre, partners with Triago, speak at the Reuters Private Equity and Hedge Funds Summit in New York, March 1, 2010.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - After a year of little activity, investors are likely better positioned to sell stakes in private equity funds this year because the price gap between buyers and sellers has narrowed, two industry executives said on Monday.

Pension funds, endowments and family offices, where an investor often manages money for a number of wealthy families, that invest in private equity funds, can exit their investments through the so-called "secondary market".

Last year, a number of high-profile university endowments, including Harvard and Stanford, expressed interest in getting out of some of what they owned.

"What you will see now is the people who sat on the sidelines in 2009 will become more active this year," said Jean-Marc Cuvilly, a partner at Triago, which helps private equity firms raise money for funds and sells private equity assets for investors.

Some of the big name endowments had trouble last year, in part, Cuvilly said, because their plans were discussed so prominently in the market. "That much publicity was not helpful," he said.

This year, however, should be better, in part because prices have normalized to levels where investors are ready to move forward again.

With an estimated $490 billion in capital ready to be deployed, the landscape should improve significantly, Cuvilly and his Triago partner, Jeremie Le Febvre, said at the Reuters Private Equity and Hedge Funds Summit in New York.

Cuvilly said high-quality funds are now selling at par to a 20 percent discount, while a few months ago they were typically seeing 30 percent to 50 percent discounts.

For funds that are early in their life cycles and are yet to be invested, the change is even more dramatic, he said, citing discounts of 70 percent to 100 percent earlier during the financial crisis, compared with 25 percent to 50 percent now.

"We saw a big change in pricing from last fall," Cuvilly said, adding that there had been a dramatic gap between supply and demand. "Suddenly, there was a huge amount of capital. Now we are in a seller's market," he explained.

As private equity investors eye new opportunities around the world, China appears to be on almost everyone's wish list, Cuvilly and Le Febvre said.

"People are looking to move outside of the United States and are looking to move to Asia. They are looking at China India and maybe other developing economies," Cuvilly said. "There is a strong strong focus on China right now because everyone wants to get a piece of that."

(For summit blog: blogs.reuters.com/summits/)

(For more on the Reuters Private Equity and Hedge Funds Summit, see [ID:nN0196038])

(Reporting by Svea Herbst-Bayliss and Megan Davies; Editing by Tim Dobbyn)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.