The effects of the financial crisis promised to boost activity on the private equity secondary market in 2009. While many institutional investors put private equity fund investments on hold during the market downturn, a large proportion were attracted to the secondary market in the hope of purchasing private equity fund interests at a considerable discount. However, private equity secondary market transactions completed over 2009 so far have not been as frequent as expected as sellers have been reluctant to part with their stakes at such discounts. Nevertheless, institutional investors remain confident that this is going to change.
A recent survey carried out by Almeida Capital – a provider of fund placement, advisory and secondary transaction services to the private equity industry – in association with AltAssets, reported that three quarters of LPs surveyed plan to buy private equity fund interests within the next 12 months. LPs profiled on Preqin’s Secondary Market Monitor are also keen to buy on the secondary market and 40% have plans to execute such a deal. Furthermore, Almeida Capital found that secondary market participants believe the best time to buy private equity fund interests on the secondary market will be very soon and Q2-Q4 of 2010 will be the best time to sell.
Preqin’s data supports these findings; reporting that 77% of LP buyers are planning to do so immediately or within the next 12 months, and that 80% of all LPs looking to sell interests are aiming to do so in 2010-2011. To ensure that secondary transactions are being completed going forward, sellers must find long-term investors that are keen to build strong relationships with GPs to purchase their interests, and buyers must be prepared to pay realistic prices for the fund stakes in which they are interested.
Preqin’s Secondary Market Monitor offers a unique and completely complimentary service for investors seeking to gain an indication on the value of their private equity holdings. In addition, the service offers investors the opportunity to receive bids from real secondaries players, including a guaranteed offer from leading specialist NYPPEX. At all times the seller remains anonymous – only when a bid has been accepted will the identities be revealed.
If you would like to receive more information on receiving free price indications, or would like more information on becoming a buyer and gaining access to this unique source of secondaries dealflow, please visit www.preqin.com/smm and contact us at firstname.lastname@example.org to request a walkthrough.