Secondaries and Liquidity in Private Equity

A Private Equity fund ties up its investors’ capital for ten years or more. The secondary market offers an earlier way out: an investor sells its fund interests to a buyer (an “LP-led” secondary), or the manager transfers one or more portfolio companies into a new vehicle, the continuation fund (a “GP-led” secondary). This market has become central now that IPOs and trade sales are growing scarcer.

Key metrics:

• the volume of the secondary market;
• the discount to net asset value (NAV);
• the holding period of portfolio companies;
• DPI, which measures what investors have actually got back.

Start with: No. 29 — What Is a Continuation Fund, and Why Is It So Successful? · No. 26 — Private Equity: An Asset Class Come of Age