CS Axa

By Laura Kreutzer 

PARIS -- French private-equity firm Ardian raised $10.8 billion to purchase private fund stakes, part of a growing pool of capital that enables investors to sell their private-equity holdings to secondhand buyers.

Separately, the French firm, which was spun off in 2013 from French insurer AXA SA, raised an additional $3.2 billion across several investment vehicles to back commitments to newly formed private-equity funds.

Purchases of secondhand stakes in private-equity funds, termed secondary deals, reached between $30 billion and $40 billion in 2015, according to various estimates from several intermediaries that track such deals. That is up from an estimated $20 billion to $30 billion in volume in 2013, those intermediaries estimated.

"Secondaries have come of age," said Vincent Gombault, who leads Ardian's secondary activities, among other leadership roles. "It's no longer a market for distressed sellers or those that need to sell for regulatory [reasons]. We are offering liquidity to many large institutions."

Ardian, which wrapped up its newest secondary fund, ASF VII, two years after closing the fund's predecessor, said it has amassed a total of more than $27 billion to invest in secondary deals since 2011. It joins a small group of elite investors, including pension investor Canada Pension Plan Investment Board and fellow secondary firm Lexington Partners, with the financial firepower to underwrite $1 billion-plus deals on their own.

Capital available to invest in secondary transactions has ballooned in recent years, creating a competitive environment and driving up pricing for certain deals. Secondary firms in the U.S. and Europe raised $16.07 billion for new funds in 2015, on top of $25.27 billion raised for new funds in 2014, according to Dow Jones LP Source, a data provider owned by Dow Jones & Co.

Higher prices for assets combined with strong returns have helped attract to the market sellers that might not otherwise sell, according to Mr. Gombault.

"We want to offer liquidity to the seller, but our pricing has to match their assumptions," he said. "If you want to price a $1 billion portfolio at a discount of 20%, you will have no sellers."

Public market volatility during the latter part of 2015, however, put a slight damper on deal flow early this year and has only recently started to recover, according to intermediaries and sellers.

"You had buyers and sellers both sitting on the sidelines during the first quarter," said Shawn R. Schestag, managing director and head of secondary advisory and co-investment at Sixpoint Partners, a global investment bank focused on the middle market. "But we think the second half [of 2016] could be very strong, because there's a lot of pent-up demand."

Ardian has invested or committed about 25% of the money it raised for its latest secondary effort to six deals, using capital raised early in the fundraising process, Mr. Gombault said. In late 2015, for example, U.K.-based pension manager Universities Superannuation Scheme said it sold a roughly $940 million portfolio of 13 private-equity funds to Ardian as part of a shift in the pension system's strategy toward direct investments.

Mr. Gombault added that the insight his firm has gained through backing new private-equity funds provides a window into how managers invest, as well as valuable information for pricing secondary transactions. The firm said it has backed about 1,200 funds representing about 10,000 underlying portfolio companies.

"Of course, we don't want to pay too much, but if you pay huge discounts on bad assets, your discounts will never be enough," he added.

Write to Laura Kreutzer at laura.kreutzer@wsj.com

(END) Dow Jones Newswires

April 19, 2016 03:14 ET (07:14 GMT)

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