Due to unstable market conditions and the increased discounts at which listed fund of funds are trading we have seen more and more listed fund of funds managers suspending or ceasing their private equity investments and adopting realisation strategies whereby they return the value of their portfolios to shareholders over a period of time. In order to speed up the process of distributing proceeds back to shareholders, some listed funds of funds are opting to sell their private equity fund investments on the secondary market. Listed funds of funds make up approximately 3% of sellers profiled on Preqin’s Secondary Market Monitor. While this is only a small proportion of all sellers, a substantial 64% of all listed fund of funds Preqin has spoken to about their secondary market activity are considering selling fund investments within the next 24 months.
One listed fund of funds that is known to use the secondary market to exit its private equity fund investments as part of its realisation strategy is Henderson Private Equity Investment Trust. Back in September 2010 it announced plans to adopt a realisation strategy. As part of the strategy it occasionally considers exiting some of its private equity fund investments via the secondary market and is known to have sold its stakes in several funds, including August Equity Partners II and Lyceum Capital Fund II. It anticipated that it would take one to two years to fully implement the strategy so may sell additional fund investments in the months ahead.