Barclays Upgrades CVC as secondaries surge amid private equity exit slowdown

Investing.com -- Barclays (LON:BARC) has upgraded CVC Capital Partners (AS:CVC) to “overweight” from “equal weight” as persistent challenges in private capital realisations continue to elevate secondaries markets, in a note dated Tuesday. 

The analysts cite limited asset realisations within private equity as a primary factor constraining liquidity for Limited Partners (LPs), intensifying reliance on secondaries as a liquidity solution for both LPs and General Partners (GPs).

The secondaries market has grown at a compound annual growth rate (CAGR) of over 14% in the past decade, with transactions accounting for 20% of private equity exit activity. 

Barclays forecasts a 9% CAGR through 2029, projecting potential earnings upside for firms with substantial secondaries exposure. 

Initially, 2025 was expected to see recovery in primary private equity transactions, but ongoing macroeconomic uncertainty stalled this, instead fueling further growth in secondaries.

CVC entered the secondaries market through its acquisition of Glendower Capital, completed in July 2024. This segment now constitutes about 10% of CVC’s total assets under management (AUM), contributing a similar portion to management fee revenues. 

The latest fund, SOF VI, had reached $4.3 billion in AUM by Q1 2025 and targets $7 billion, representing a 20% increase from its previous vintage. 

For every additional €1 billion raised, Barclays estimates fiscal 2026 earnings per share could rise by roughly 1%, assuming constant conditions.

Globally, secondaries transaction volumes rose 45% year-on-year in 2024, surpassing $162 billion, equaling 20% of total private equity exit volume. 

Pricing also rebounded, with LP-led transactions averaging 89% of net asset value (NAV), and buyouts reaching around 95% of NAV. 

GP-led transactions saw 87% of single-asset deals and 71% of multi-asset deals priced above 90% of NAV.

Fundraising momentum remains robust. In 2024, secondaries raised over $100 billion globally, and by Q1 2025, secondaries accounted for 15% of total private capital fundraising.

Key fund closings include Ardian’s $30 billion Secondary Fund IX and ICG’s $11 billion Strategic Equity V. European investors have played a crucial role, with Ardian sourcing 22% of its fundraise from private individuals.

Barclays underscores that CVC’s valuation trades at a discount to both European and U.S. peers despite its diversified exposure. CVC’s price-to-earnings ratio stands at 20.2x for 2024, declining to 13.7x by 2027. 

Dividend yields are projected to rise from 1.3% in 2024 to 3.1% by 2027. This valuation contrasts with higher multiples among U.S. managers like Blackstone (NYSE:BX) and Ares.

Barclays maintains an “overweight” rating on Intermediate Capital Group (LON:ICGIN), whose secondaries AUM represents 20% of total fee-earning AUM, following the final close of Strategic Equity V. 

Partners Group remains active across private equity and infrastructure secondaries but discloses limited standalone secondaries data.