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Alternative Market Briefing

Hedge fund side pocket secondary market volumes top $1.6bn in 2013

Monday, January 13, 2014

Bailey McCann, Opalesque New York:

A new report out from Setter Capital shows that secondary market volumes for hedge fund side pockets was up again in 2013. Data shows that LP's are becoming more opportunistic fueling greater market activity. Setter Capital estimates the total secondary market volume for 2013 was $36bn, authors note that the figure may be conservative owing to the limits of their own research.

A majority of respondents expect the same or greater level of transaction activity to take place in the first quarter of 2014. The average size of these transactions in 2013 was $28m, and that deal size is also expected to continue. Private Equity Strategies reported last year on the significant uptick in the private equity secondary market as those transactions shifted away from fire sales and into garage sales for investors wishing to exit parts of their portfolios for a whole host of reasons. This same trend is spurring an uptick of activity in the hedge fund secondaries market.

Secondary hedge fund transactions still account for much less overall market volume than private equity or real estate deals, although the number increased to approximately 4.4% of all secondary transactions in 2013. Notably, the report says - "the average deal size of buyers that deployed up to $1bn in 2013 was roughly $15m suggesting......................

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