Potential Secondary Market Sellers

by Antonia Lee

  • 14 Apr 2011
  • PE
  • RE

Private equity and private real estate Investors that are either no longer investing or are over allocated and investors that have put their private equity investments on hold are prime targets for buyers of secondary fund interests. Preqin Secondary Market Monitor holds data for 244 investors that have stated some level of interest for selling private equity or private real estate fund stakes on the secondary market, and now holds profiles for over 1,400 potential secondary market sellers based on their investment status.

Private Sector pension funds form the largest portion of possible secondary market sellers, comprising 12% of the potential sellers. Firm types such as foundations and endowment plans, which each make up a considerable 7% of all the possible sellers, are reliant on returns from investments and charitable donations so are therefore more susceptible to adverse economic conditions. They are more likely to have ceased making alternative investments and be in a position where they need to sell some fund investments. One particular endowment plan which would consider selling on the secondary market is Harvard Management Company. In order to actively manage its portfolio, the endowment expects to occasionally use the secondary market to sell stakes in private equity and private real estate fund stakes.

There are also more banks, which form 9% of potential sellers, coming to the market to offload illiquid and non-core assets after the financial downturn. Royal Bank of Scotland (RBS) is one bank looking to sell off its private equity fund stakes on the secondary market, having began winding down its fund investment business in June 2010. While RBS has since sold off a large portion of its private equity investments, it still has a few outstanding interests that it may be looking to sell.

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