Elm Capital: Secondary Markets Review – April 2024

April, 2024

The secondary market experienced strong growth in 2023, steered by a significant uplift in LP-led transactions in H2 amidst a challenging liquidity environment and the surge of capital raised for secondary funds.
As we venture further into 2024, recession fears have dampened and the secondary market continues on a positive trajectory following on from the end of 2023, providing a robust tool to generate liquidity for both LPs and GPs.
Lack of distributions drives deal flow in the secondary market: 2023 was marred by continued geopolitical tension and international conflicts, significant government spending causing high inflation, and subsequent tightening of monetary policy. The resulting rise in interest rates had a particularly negative impact on private equity markets. During the years of ultra-low interest rates, fund managers were able to borrow sizeable amounts at low cost, and to acquire companies at high valuations. In the current environment of higher rates, leverage is significantly more expensive, and it has become challenging for fund managers to exit companies with a decent uplift, as valuations have generally come down

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