15/12/2011

Secondary market enjoys strong 2011

Outstanding assets in side pockets currently stand at about $80bn, new research suggests, with a strong year for the secondary market buoyed by a large number of new counterparties.

According to Tullett Prebon Alternative Investments, an inter dealer broker, “the secondary market remained strong” during 2011.

“In pricing terms, increased competition and demand ensured that prices remained stable and rose higher in the first half of the year,” the firm said in a press release. “However, the summer crisis left the market in a markedly different state, with prices being pulled back along with risk appetite.”

In 2011, approximately 35% of selling counterparties sold their entire portfolios, or otherwise exited their illiquid positions completely, with that figure expected to grow in 2012 as exits accelerate.

In regards to future volumes, Tullett estimates that up to 20% of the $80bn outstanding is already in the hands of secondary buyers, effectively taking that supply out of the market.

Going into 2012, the firm predicts that up to $3bn of capital is ready to be allocated to the space, and over the next 12-24 months another $6-10bn of supply will, depending on discount levels, go into the hands of secondary buyers.