UBS Private Equity Secondary Market Review UBS Private Funds Group June 2011

Transcription

1 UBS Private Equity Secondary Market Review UBS Private Funds Group June 2011 UBS Private Funds Group Secondary Market Review The UBS Private Funds Group s Secondary Advisory Practice was launched in 2004 with the mandate to provide the highest quality sellside advice to owners of private equity portfolios. In the current installment of this series, UBS provides a comprehensive review of secondary market activity in 2010 and the first quarter of 2011 and highlights key issues and trends that will impact the secondary market in Our perspective is unique within the secondary market, based not only on our experience as a leading placement agent and secondary advisor, but also as a seller in the structuring and execution of UBS s own $1.3 billion secondary transaction in To date, UBS has advised on and executed over $24 billion of secondary transactions and has established itself as a market leading advisor. 2 Review of the Secondary Market 2010 Market Environment Secondary volume rebounded to record levels in 2010, totaling approximately $22 billion which represented a 132% increase as compared to 2009 levels ($9.5 billion). 3 The combination of improved capital market conditions and strong levels of available capital resulted in a dramatic improvement in the pricing environment during the first quarter of 2010, while increased regulatory pressure crystallized financial institutions intention to sell risk assets. Following a somewhat slow start to the beginning of 2010, the year began to pick up momentum following the announcement of Bank of America s $1.9 billion transaction and RBS 400 million transaction. These transactions were particularly noteworthy given their size, which seemed to signal that both sellers and buyers were comfortable making large splash trades, a feature clearly missing from the market in The large splash trade theme continued through 2010 and has carried forward into 2011, as there have already been eight transactions greater than $500 million brought to market in the first half of However, dry powder declined in 2010 for the first time since 2006, a feat that may be repeated in 2011 with expectations for at least another $20 billion in transaction volume. While there is sufficient dry powder among secondary buyers and capital markets conditions are buttressing pricing levels, technical supply and demand factors could impact pricing / competition later in 2011, particularly with so many large secondary buyers fundraising. Pricing Trends 4 After ending 2009 at an average discount of (31.6%) for buyout assets and an average discount of (36.8%) for all assets, pricing improved meaningfully during the first quarter of 2010 to an average discount of (12.1%) for buyout assets and an average discount of (12.5%) for all assets. Thereafter, pricing seemed to stabilize to modestly improve throughout 2010 ending the year at an average discount of (11.7%) for buyout assets and an average discount of (15.5%) for all assets. Thus far in 2011, pricing has been relatively unchanged from fourth quarter 2010 levels, except for buyout pricing which increased to a (3.0%) discount. QUARTERLY PRICING FOR PRIVATE EQUITY ASSETS % (Discount) to NAV 0.0% (10.0%) (20.0%) (30.0%) (40.0%) (50.0%) (3.0%) (8.2%) (7.5%) (10.3%) (12.1%) (13.4%) (9.8%) (11.7%) (13.1%) (12.5%) (18.0%) (25.0%) (18.1%) (17.2%) (15.5%) (21.1%) (26.5%) (31.6%) (34.0%) (30.9%) (36.8%) (33.9%) (38.8%) (36.9%) Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 All PE Buyout Venture Energy To find out more about UBS s dedicated private equity secondary market advisory services, please contact: Nigel Dawn Managing Director, Global Co-Head UBS Private Funds Group nigel.dawn@ubs.com Source: UBS-advised transactions; based on the average of the high bids received

2 Pricing Trends (continued) Pricing for energy funds is also particularly notable as the average discount price for energy focused funds was better than buyout funds for the 2nd, 3rd and 4th quarters of Energy appears to have developed into a thematic investment for select secondary buyers. In addition, many secondary buyers have been particularly attracted to US energy funds due to the inherent barriers to entry created by tax leakage that makes it harder for non-us buyers to acquire these interests at market clearing levels. The stable to modestly improving optical pricing levels evidenced during 2010, despite rising net asset values ( NAV ), suggests that buyers expectations regarding future performance were improving throughout the year. As a result, sellers that waited until later in 2010 to execute transactions generally received increased purchase price proceeds. However, as the table demonstrates, determining the optimal time to sell should not be exclusively predicated on whether increased purchase price proceeds were generated. For example, sellers that sold during the second quarter of 2010 based on a December 31, 2009 reference date and invested the purchase price proceeds in the S&P 500 would have been in an equal to better than position than the sellers in the third and fourth quarters of Moreover, this analysis does not make any adjustments for risk which would further skew the analysis towards second quarter 2010 sellers. TIMING OF SALE DECISIONS 45 days for interim financial statements, 9.30 financial statements tend to become stale. More specifically, GPs are able to provide guidance on year-end valuations in advance of the completion of the audit process which buyers are able to reflect in their pricing relative to the 9.30 NAVs. With many large buyout funds predicting double-digit write-ups to 9.30, optical pricing expectedly increased as buyers incorporated the new information into their analysis. Transaction Volume Secondary market volume was approximately $22.0 billion in 2010, representing a 132% increase from 2009 levels. 3 In addition, transaction supply increased to $27.5 billion from $16.3 billion in 2009, representing an increase of 69% (note that UBS s transaction supply likely understates the actual transaction supply as the data generally captures only intermediated transactions and publicly announced non-intermediated transactions). 3 The disparity between the increase in transaction volume and transaction supply suggests that transaction completion rates increased dramatically in 2010, which is not surprising given pricing levels. SECONDARY TRANSACTION VOLUME (US$ bn) Reference Date Dec-09 Mar-10 Sep-09 Jun-10 Marketing Period Q1 '10 Q2 '10 Q3 '10 Q4 '10 Closing Date Mar-10 Jun-10 Sep-10 Dec-10 Reference Date NAV (% Discount) Buyout Funds 2 (12.1%) (18.1%) (13.4%) (11.7%) Base Purchase Price Post-Reference Date Net Cash Flow (4.97) (13.95) Cash Received at Closing S&P 500 % Change from Closing Date to 06/30/10 3 (11.86%) 0.00% n/a n/a S&P 500 % Change from Closing Date to 09/30/10 3 (2.41%) 10.72% 0.00% n/a S&P 500 % Change from Closing Date to 12/31/ % 22.02% 10.20% 0.00% Cash Position at 06/30/ n/a n/a Cash Position at 09/30/ n/a Cash Position at 12/31/ Notes: 1 Based on a hypothetical portfolio consisting of equal weighted commitments to large buyout funds 2 Based on the average of high bids received during the applicable Marketing Period 3 Based on FactSet 4 Cash Position asssumes Cash Received at Closing is subsequently invested in the S&P 500 While the quarterly pricing data has generally been relatively stable, the first quarter of 2010 and 2011 data reveal that the market experienced material changes in optical pricing levels, particularly for buyout funds. While there are many factors contributing to the change in optical pricing levels, a chief contributor is the year-end phenomenon. This phenomenon, which is most likely to occur during the first two to three months of every year prior to the release of year-end audited financial statements, is amplified during periods of changing macroeconomic conditions. With year-end audited financial statements sometimes taking up to 120 days to be finalized instead of the customary 30 to Source: Publicly available data and UBS estimates As mentioned previously, market conditions allowed for a greater number of large transactions (greater than $500 million in transaction value). In aggregate, there were at least eleven transactions in 2010 that were greater than $500 million as compared to only three in Although financial institutions and US public state plans / public agencies were the sellers for eight and three of the largest transactions in 2010, respectively, their rationale for selling was quite different. For financial institutions, it was regulatory reform and for state agencies / public agencies, it was portfolio management. 2

3 2007/8/9/10 TRANSACTION VOLUME BREAKDOWN FUNDS AND DIRECTS (US$ bn) Directs 27% LP 73% Directs 33% Directs 15% LP 67% LP 85% Directs 17% LP 83% Source: Publicly available data and UBS estimates LP transaction volume in 2010 represented 83% of total secondary transaction volume, continuing a trend established in 2009 in which direct transactions made up a significantly smaller percentage of overall secondary volume. 3 Further segmentation reveals that mega buyout and large buyout funds represented 39% and 31% of LP transaction volume, respectively. 3 This seems logical given that 2010 transaction volume was driven by financial institutions rationalizing their pay-toplay portfolios and state plans / public agencies implementing portfolio management strategies by reducing exposure to mega and large buyout funds from vintages. In addition, there is a deep and fairly efficient market for mega buyout and large buyout funds, so it seems natural that sellers would seek transactions with lower execution risk and a faster execution timeline following a year in which it was challenging to execute a secondary transaction FUND TYPE BY INVESTMENT STRATEGY LP TRANSACTIONS Other 5% Energy Venture 3% <1% LGT, which together raised approximately 50% of the dedicated capital. 5 Additionally, 2010 saw increased focus on separate accounts as several large sovereign wealth funds, seeking to capitalize on the benefits of the asset class and current market opportunity, sought to partner with leading secondary buyers. As a result, there are very few remaining sovereign wealth funds operating autonomously (i.e., independent of an advisor) that can be characterized as non-traditional buyers promises to be a more active year for fundraising with twelve large secondary buyers expected to be in the market seeking commitments in excess of $25.0 billion. 5 AXA, Coller, Credit Suisse, DB Private Equity, HarbourVest, Partners Group and Permal are all currently fundraising for their successor funds, while Lexington is currently finishing fundraising for its latest fund. In addition, it is expected that LGT, Paul Capital and Pomona will formally begin fundraising later in 2011, while AlpInvest, which was acquired by The Carlyle Group and AlpInvest management, is currently planning for its inaugural fundraise and may begin marketing in late Although the overall fundraising market is expected to improve in 2011, it is noteworthy that a recent Preqin Ltd. survey detailed that 8% and 3% of responding LPs viewed secondaries as an area of the market presenting best opportunities and where they sought to invest in 2011, respectively. 6 This represented a significant decline from a similar Preqin Ltd. survey taken in February 2010, for which the LP response for the same categories was 20% and 17%, respectively. 7 Such a dramatic decline in the perceived level of attractiveness for secondaries will only serve to amplify the level of competition and may potentially result in a more challenging fundraising environment for secondary funds FUNDRAISING CHART BY PROGRESS Mid-Market Buyout (<$1 bn) 22% Mega Buyout (>$5 bn) 39% AlpInvest AXA Private Equity Coller Capital Credit Suisse 1,000 2,500 3,000 5,000 DB Private Equity 500 HarbourVest Partners 3,500 Lexington Partners 900 LGT 2,000 Large Buyout ($1 bn - $5 bn) 31% Partners Group 1 Paul Capital Permal Pomona 150 1,300 2,000 3,900 Source: Publicly available data and UBS estimates Fundraising Secondary fundraising in 2010 totaled approximately $12.5 billion, roughly equal to 2009 fundraising levels, which was consistent with the performance of the overall private equity market. 5 In addition, 2010 represented somewhat of an off-year for secondary fundraising, as most of the large dedicated groups were out of the market, except for Lexington, Pantheon and 0 1,000 2,000 3,000 4,000 5,000 6,000 Preparing / Pre-Marketing - $6.3 bn Marketing - $18.6 bn Closing - $0.9 bn Note: 1 Target size of EUR 3.0 billion converted at the rate of 1.0 EUR = 1.3 USD ($ mm) Source: Private Equity Intelligence, Thomson Financial VentureXpert and UBS estimates 3

4 As part of its periodic review, UBS has also analyzed several other developments in the secondary market. The Drive-By Secondary The drive-by secondary, a concept created by UBS, is a unique and novel transaction approach that is designed to capitalize on the depth and efficiency of the secondary market, particularly for mega buyout and large buyout funds which we generally refer to as flow funds. At its most basic level, the drive-by secondary is defined as a sale transaction consisting of flow funds (i.e., Apollo, Blackstone, Carlyle, TPG, etc.) in which no information is shared with buyers other than a seller s commitment amounts and the due diligence period is accelerated limited to one to three weeks. The drive-by secondary is not appropriate for all sellers, nor is it appropriate for certain kinds of assets. However, when used effectively through a comprehensive and tailored transaction approach, the drive-by secondary can provide tremendous benefits to potential sellers. In addition to reduced liability from sharing of confidential information and reduced GP interaction / lower transfer expenses, the drive-by secondary allows sellers to almost immediately capitalize on a current market and pricing environment. In previous years, it could take sellers anywhere from six to ten weeks (sometimes longer) to get to market and receive bids, by which time the market could have changed dramatically from when the initial sale decision was made. However, the level of competition in the secondary market, given the depth and breadth of the dedicated buyer community, has pushed buyers to seek ways to differentiate themselves and be more competitive. Evolving from this competitive spirit, buyers have started maintaining perpetual models / pricing, even investment committee approved bids, on many flow funds, which enables them to react seamlessly to opportunities where speed can be the differentiating factor between winning and losing. While the benefits of the drive-by secondary can be alluring, it also magnifies the importance of sound transaction execution. This type of transaction strategy places an increased premium on the strategic elements of transaction timing (when to launch a transaction) and knowledge of the buyer universe. Specifically with respect to knowledge of the buyer universe, it is critical to understand which buyers are existing investors in which funds and / or have information to conduct due diligence. Equipped with this knowledge, an experienced advisor can identify and eliminate information voids, which will augment a more even playing field among all buyers and foster a higher level of competition and transaction flexibility. Fortunately for sellers interested in benefiting from this type of transaction approach, UBS is able to leverage its market leading position as a secondary advisor with its proprietary data. The successful implementation and execution of drive-by secondaries exemplifies UBS s keen understanding of the secondary market, and demonstrates UBS s ability to innovate for the benefit of the seller. Real Estate Secondaries Historically about 6% of total private equity secondary volume and often an ignored segment of the secondary market, real estate has undergone a perceptible change in the past 18 months as secondary buyers position themselves to capitalize on what is believed to be an under-represented and undercapitalized segment of the market. 8 Further intensifying this development is the perception that secondary opportunities will abound due to the amount of primary capital raised by real estate funds at the peak of the last fundraising cycle and the level of distress in the commercial real estate market. While the expected level of transaction supply has yet to be fully realized, UBS believes that the real estate secondary market will experience a developmental growth phase once limiting transitory factors uncertainty about NAV / valuation levels and distressed pricing wane. While pricing has started to recover and certain assets are pricing closer to NAV, many opportunity and value-added funds remain challenged. TOTAL RETURNS FOR NCREIF TOWNSEND FUND INDEX 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Opportunistic Value-Added Source: Publicly available NCREIF Townsend Fund Returns For many years, the real estate secondary market was characterized by sporadic transaction supply and was dominated by three buyers Credit Suisse, Landmark Partners and Liquid Realty. However, in 2006, Liquid Realty completed a 435 million secondary transaction, acquiring a portfolio of Jersey Property Unit Trusts. Believed to be one of the largest, if not the largest, real estate secondary transactions consummated, this brought significant attention to the real estate segment of the market. Thereafter, various investment groups began drawing parallels between the development and growth of the traditional secondary market and the potential development of the real estate market. The 4

5 attraction of the real estate market was further galvanized with the onset of the financial crisis and its subsequent impact on commercial real estate values. More specifically, buyers anticipated that the more than $400 billion in real estate capital raised for opportunity and value-added funds since 2004 would create a significant market opportunity for both traditional LP transactions and direct / fund restructuring transactions. 9 As a result, the dedicated secondary buyer community has grown exponentially to encompass at least twelve dedicated real estate secondary managers controlling approximately $2.8 billion of dry powder. 10 Concurrently, the non-traditional or non-dedicated market has also grown significantly to encompass a wide variety of buyer types, including asset managers, endowments and foundations, fund of funds, public pension funds and sovereign wealth funds. While the real estate secondary market is still underdeveloped relative to the traditional private equity secondary market, the level of growth and development witnessed over the past 18 months is undeniable. SECONDARY MARKET FOR PRIVATE EQUITY VERSUS REAL ESTATE Private Equity Real Estate Cumulative Primary Capital Raised Since 2001 $2.7 trillion $457.8 billion Transaction Volume Since 2001 $106.4 billion $5.8 billion Transaction Volume as a % of Capital Raised 3.9% 1.3% Number of Dedicated Secondary Buyers >70 12 Dry Powder $35.5 billion $2.8 billion Dry Powder as a % of 2010 Theoretical Supply ~150% ~115% Source: Private Equity Intelligence, Thomson Financial VentureXpert, UBS estimates and proprietary UBS survey While the overall technical process of executing a real estate secondary sale of an LP interest is similar to that of a traditional private equity secondary, there are profound differences in the underlying assets. Whereas traditional private equity valuation tends to be more revenue or cash flow based, real estate tends to be more hard-asset based. As a result, there is very little overlap in the buyer community for traditional private equity secondaries and real estate secondaries. Not only are most traditional private equity secondary buyers uncomfortable evaluating real estate funds, many are prohibited from doing so through their respective limited partnership agreements. From a seller s perspective, the less efficient nature of the real estate secondary market relative to the traditional private equity market renders the service and advice provided by an experienced secondary advisor even more valuable. That said, providing tangible value to sellers is contingent on advisors being able to harness the benefits of a demonstrable secondary track record, knowledge of the real estate secondary buyer community and proven real estate expertise. The UBS Private Funds Group has been able to leverage the attributes of its market leading secondary advisory business, its position as a real estate placement agent and the Investment Bank s leading Real Estate and Lodging and Leisure advisory practice to provide sellers with the highest quality sell-side advice for real estate assets. Review of the Hedge Fund Secondary Market The hedge fund secondary space has been a historically small niche market, but certain trends in the sector suggest that it represents a meaningful opportunity in absolute dollar terms due to the number of new entrants on the buy side and demand for holistic solutions on the sell side. While there is no definitive data to accurately size the market, there is speculation that a large number of hedge fund managers still hold illiquid investments, which has led to a wave of demand and the emergence of new creative monetization solutions. The market upheaval of 2008 and 2009 resulted in a record number of redemptions from investors seeking to either generate liquidity or manage risk. However, at that point many hedge funds had suspended redemptions, either due to the sheer volume of requests or because the underlying assets were illiquid. As a result, an active secondary market formed to enable the transfer of positions in traditional hedge funds that raised gates on redemptions ( Locked-up Positions ) and interests in hedge fund vehicles that held mainly illiquid investments ( Side Pocket Interests ). Given the prevailing market dynamics that existed during this period, most sellers were motivated by uncertainty or distress, which enabled secondary buyers to acquire assets at significant discounts to reported market values. Market dynamics shifted quickly in 2010, with a meaningful recovery of investor confidence, which led to an increase in assets under management for the global hedge fund industry of 20%, from $1.6 billion in 2009 to $1.9 billion by the end of As a result, there were few remaining forced sellers and those that were interested in liquidity were increasingly price sensitive as capital market conditions improved and market fears subsided. We believe these factors led to a modest decline in 2010 hedge fund secondary activity from 2009 levels. While the volume of Locked-up Positions sold in the secondary market has decreased, many hedge fund investors still have exposure to Side Pocket Interests. Hedge fund managers have been cautious in selling down their illiquid portfolios because they have been hesitant to realize a loss on the investments and in many cases they still believe in the long-term value of 5

6 the assets. This stance by hedge fund managers has had an impact on a number of investors, but in particular it has had a trickle-down effect for fund of hedge funds, which have been unable to fully return capital to their investors despite experiencing their own record number of redemptions. Side Pocket Interests are all that remain for some fund of hedge funds that are in liquidation or are winding down certain products. Selling assets in the secondary market not only generates liquidity, but also helps relieve administrative burden and can improve investor relations, for those that still manage other fund products. Many fund of hedge funds and other investors have sold single manager exposures in the secondary market over the past months. Going forward, we expect to see continued strategic sales of hedge fund secondaries. However, the activity will primarily be in Side Pocket Interests and sellers will seek more portfolio sales that present a complete solution for their stub positions as opposed to the piecemeal approach. Hedge fund returns have improved markedly, with the HFRI Fund Weighted Composite Index gaining 10.5% in Now that portfolios are generally healthier, investors may shift their attention to cleaning up assets that do not fit with their ongoing investment strategies. Even if a sale results in a loss, in most cases it will be small relative to the size of an investor s overall portfolio. Furthermore, many hedge fund investors are not structured to hold illiquid assets and, in some cases, may be faced with the threat of holding private market assets for another 3 5 years if they do not sell prematurely. There have been a limited number of estimates published by the market regarding the size of the hedge fund secondary opportunity. A survey conducted by UK s Financial Services Authority in September 2010, indicates that hedge fund side pockets represent about 11% of aggregate NAV for hedge funds with offices in the United Kingdom. The survey reportedly represents about 20% of the global hedge fund industry, or approximately $380 billion in assets under management. 12 This implies side pocket exposure of roughly $42 billion for this subset of the market; simply extrapolating this into estimates for the global market results in a figure that is closer to $200 billion. Based on conversations with market constituents and our own informal surveys, UBS s estimate of the market opportunity is closer to $75 billion, which would represent about 4% of the global hedge fund assets under management as of the end of /6/7/8/9/10 HEDGE FUND INDUSTRY ASSETS UNDER MANAGEMENT (US$ bn) 2,500 2,000 1,500 1, , , , , , , Source: HFR Global Hedge Fund Industry Report, Year-End 2010 Despite there being a potentially meaningful supply of illiquid hedge fund investments, the universe of buyers has historically been fairly small, particularly for Side Pocket Interests. Recently however, we are beginning to see a discernable increase in the number of market participants. Generally speaking, the most active hedge fund secondary buyers can be placed in the following categories. Traditional fund of hedge funds Even prior to the economic disruption that commenced in the second half of 2008, there was a modest amount of secondary hedge fund market activity. Often times, these transactions would be brokered by the hedge fund manager and offered to its existing investor base. In 2008 and 2009, some of the larger fund of hedge funds began to more actively originate secondary opportunities in familiar hedge fund names. Most of their focus has been on Locked-up Positions and only a handful of these investors will acquire Side Pocket Interests. Dedicated secondary hedge funds With the increasing volume of secondary activity, dedicated pools of capital were formed by new investors or existing fund of hedge fund investors. Most of this capital was specifically formed to acquire illiquid positions. These funds typically have been set up with a fixed investment period, fund life and no redemption feature, providing greater flexibility to invest in longer dated opportunities. Some of these funds have reached close to $1 billion in assets under management and have the ability to complete large or complex portfolio transactions. Dedicated secondary private equity funds The market for acquiring private equity assets in the secondary space has grown dramatically since As this market has become crowded, several players have spent an increasing amount of time evaluating hedge fund opportunities. A handful of large secondary private equity players have completed transactions in the hedge fund space. Most of these funds are managing capital that well exceeds the billion dollar mark and their funds are already structured to hold assets with a longer 6

7 investment horizon. Dedicated secondary private equity funds will typically only consider classic private equity style investments held in side pockets. Hedge funds Other hedge funds have become increasingly interested in evaluating Side Pocket Interests, typically credit or real estate related. Most hedge funds are interested in active investment opportunities. However, passive stakes in other hedge funds will be acceptable as long as there is limited blind pool capital risk. Foundations and family offices There are a number of foundations and family offices that are interested in secondary hedge fund interests. Analytical resources at these firms tend to be limited and therefore the scope of opportunities that they can evaluate is narrower. Most of these investors are sophisticated and some can put a sizeable amount of capital to work for the right opportunity. As the hedge fund secondary market continues to gain momentum and media attention, we expect the number of buyers focusing on these opportunities will continue to increase. Given the high level of analytical expertise and complexity of the underlying assets, we expect more dedicated capital to enter the market as these types of investors will be best placed to capitalize on the opportunity. As the market continues to develop, an efficiently run sell-side process will be imperative to ensure that sellers receive a market clearing price. Understanding the universe of buyers, their motivations, cost of capital and desired asset exposure are all important factors. Additionally, the advisor s role is to provide customized solutions to address, at the very minimum, the seller s price, timing, legal, structural considerations and other major objectives. Larger transactions, more buyers and greater intermediation will be ongoing themes in the hedge fund secondary market. 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8 Notes: 1 Transaction size based on original commitments 2 Transaction size based on original commitments and includes one pending transaction 3 Source: Publicly available data and UBS estimates 4 Source: UBS-advised transactions; based on the average of the high bids received 5 Source: Private Equity Intelligence, Thomson Financial VentureXpert and UBS estimates 6 Source: Preqin Investor Outlook: Private Equity, December Source: Preqin Research Report: Private Equity Investor Survey, February Source: Private Equity Week, Columbia Strategy, Thomson Financial and UBS estimates; based on the average of real estate secondary volume from as a percentage of total private equity secondary volume 9 Source: Preqin Ltd. 10 Source: UBS proprietary survey, December Source: HFR Global Hedge Fund Industry Report, Year-End Source: Financial Services Authority: A Report on the Findings of the Hedge Fund Survey and Hedge Fund as Counterparty Survey, February