Private Equity Secondaries Under Pressure
PE exits and dealmaking are lagging behind wider M&A activity this year, according to Private Equity Wire. This lag places significant pressure on the secondary market’s infrastructure.
The Growing Demands on Secondary Market Infrastructure
The infrastructure behind the secondary market is on a steeply upward trajectory of sophistication, driven by greater demand and a dichotomy between growing transaction volumes and lagging AUM. Democratisation is expanding private markets AUM and secondaries, while bringing a bigger and wider range of investor interests, as noted in the article.
Main Challenges with Democratisation
Democratisation brings challenges such as frequency of valuations, meeting liquidity requirements, lack of operational standardisation, and overall complexity to the forefront. These issues are essential to address as they directly impact the secondary market’s ability to handle increased investor participation.
Role of AI in Secondaries
A robust data infrastructure overlaid with AI is now a must for secondaries, with firms increasingly using AI for basic tasks. The number of firms leveraging AI in any form has more than doubled since last year, embodying progress in secondaries for retail investors and public-private convergence, according to Private Equity Wire. This development reflects the market’s response to growing transaction volumes.
