Non-traditional buyers of secondary market interests – i.e. investors excluding primary and secondary fund of funds managers - represent the majority of demand for private equity secondary market interests. Preqin’s data shows that 62% of all investors looking to purchase secondary market interests within the next 24 months are non-traditional buyers.
An example of a recently identified non-traditional buyer interested in purchasing secondary market interests is Kumho Investment Bank. The South Korean investment bank will consider gaining additional exposure to private equity funds via the secondary market on an opportunistic basis going forward. It is likely to consider purchasing stakes in mezzanine, growth, and pre-IPO funds. The bank has a strong preference for South Korea and China-focused funds. It will also consider funds that invest in North America.
Another investor that has recently expressed an interest in purchasing interests on the secondary market is Louisiana State Employees’ Retirement System. The US-based public pension fund is in the process of reviewing opportunities within the private equity secondary market at the recommendation of its investment consultant, NEPC. The retirement system is planning to deploy USD 100 million into private equity funds over the course of 2012 and it may allocate some of this to fund investments being sold on the secondary market in order to diverse its portfolio, access more mature investments, and reduce the risks of investing in a new fund.