PitchBook News - PE's math doesn't add up

The more pressing concern for investors, however, is that the drought in exit activity has now extended into its third year. This has created a pileup of portfolio companies that have been held for longer than normal in funds that are older than seven years.

Buyout funds that were launched more than seven years ago now hold an impressive $760 billion in NAV that will need to find an exit route soon. Based on a bottom-up fund analysis, we estimated that these older funds will require more than $240 billion in liquidity in just 2024 alone, almost twice the total trailing one-year exit value.

While many have pointed to the growing secondaries market as a reason not to be concerned about the looming liquidity need, our analysis shows that this is potentially misguided. The secondaries market will be able to provide a valuable pool of alternative liquidity, but we estimated the capital available for GP-led buyout secondaries is only about $60 billion.

On a standalone basis, this will only cover about 25% of the estimated liquidity needs from older funds. At least a partial recovery in primary exit activity will be needed to satisfy the total liquidity demand at current valuations.

For additional details and supporting data on these topics and more, please download the free report:

Quantitative Perspectives: Under Pressure