Takeaways From the 2024 Women's Private Equity Summit

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Members of the Nasdaq Fund Secondaries team joined over 1,000 women from across the private equity industry for three days of focused collaboration, networking, and information exchange at the Women’s Private Equity Summit, hosted by With Intelligence in Phoenix, Arizona.  

As a first-time sponsor of this event, we had the pleasure of speaking on the panel “The Future of Secondaries: What Will It Take to Reach Its Potential?”. My colleague Rory Mabin discussed our conviction that technology will play an essential role in bringing efficiency and scalability to this market. She joined panelists from Coller Capital, Neuberger Berman, and LGT Capital Partners. Here are my main takeaways from the discussion: 

 

Growth factors for the secondaries market:  

To start, the panelists identified several factors that they believe have contributed to the recent growth of the secondaries market, including the destigmatization of liquidity needs, the lack of natural exits in M&A or capital markets, the increase of turnover in PE, and the emergence of GP-led liquidity solutions. They also explained how they see these factors creating more demand and supply for secondaries transactions and a liquid secondaries market helping LPs and GPs to optimize their portfolios and returns. 

  • Destigmatization- Secondaries have come a long way from a stigmatized "exit hatch” to a more and more commonly accepted strategic tool for reallocation. This evolution has resulted in less reluctance among LPs to say they need liquidity in the first place.  

  • Natural Exits- When one door closes, another opens. With a lack of natural exits in recent years (IPO’s and M&A), LPs are naturally turning to secondaries for liquidity.  

  • Turnover- According to one panelist, the percentage of turnover in private equity increased from around 0.5% less than a decade ago to around 2%-3% today. Rates are expected to continue to increase, and with record amounts of capital being committed to private funds, secondaries volume is also expected to continue its upward trajectory. 

  • GP-Led Liquidity Solutions- Ten to fifteen years ago, GP-leds connotated reworked assets and negative selection bias, but high-quality GPs today are reimagining GP-led structures to help LPs ‘up and down’ their exposure.  With the proliferation of PE in general and a shift in mindset around secondaries as a tool for LPs to more proactively manage their capital, and with the exit market challenged, GPs can and are using secondaries to return capital to their LPs for continued fundraising.   

 

Challenges and opportunities for the secondaries market:  

The panelists discussed the barriers and inhibitors to the growth of the secondaries market, namely the finite pool of capital, the lack of resources and efficiency, and the gap in expectations between buyers and sellers.  

  • Finite Capital- More capital is necessary to absorb the volume waiting to come to market. Consensus amongst the panelists was that increased competition will generate competitive market dynamics that may, in–turn, reduce the difference in expectations between buyers and sellers. 

  • Inefficiency- Both buyers and intermediaries cite time and resource constraints to getting deals done.  

 

Panelists also highlighted the opportunities for new entrants, non-traditional pools of capital, and the use of technology and data to improve the market. They mentioned the potential of credit secondaries, the role of intermediaries, and the need for more transparency and standardization. 

  • Capital- An increasingly meaningful pool of capital is expected to come from traditional allocators and family offices that have specific dedicated secondaries mandates. This could be good for everyone as they are more flexible with deal profiles, for instance, a smaller manager or a GP that they don’t know. Nontraditional pools will be able to pick up the excess deal flow. 

  • Technology- For there to be real growth in this space, i.e., to get to a trillion-dollar market, as Yann Robart from Whitehorse Liquidity Partners famously predicted, there must be some level of intervention of technology. It is not sustainable or scalable to dedicate entire teams to diligence, document execution, and cash management. The panelists agreed that the application of technology is essential to break down those hurdles, streamline operations, and help us reach the market’s potential.   

 

Predictions for the future of the secondaries market:  

Finally, the panelists shared their views on the potential size and shape of the private fund secondary market in the future, with some expressing optimism and others being more cautious. They agreed that the market will continue to evolve and innovate and that the returns and performance of private equity will remain attractive for investors.