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Information on Secondary Private Equity Liquidity

Nyppex Private Markets
Information on Secondary Private Equity Liquidity

Original source: https://uberant.com/article/636753-information-on-secondary-private-equity-liquidity/

Private funds purchase shares from a company by investing large amounts. Such shares are not publicly listed. Hence, you cannot sell them on a stock exchange. The private funds hold the shares for an extended period to ensure positive returns for their shareholders. Institutional investors collect funds from high net worth individuals and invest large sums directly in a firm or entity. They are illiquid, and you need to hold for the long term for higher returns. The market has evolved and provides liquidity options. To liquidate, the large institutional investors sell the shares to another company. Therefore, it includes buy and sell transactions. The secondary private equity liquidity allows private equity funds to liquidate their funds. It may be for acquiring a stake in another company or on facing redemption issues. It ensures secondary private equity liquidity when the private equity funds offload their stake in a company to another company.

Who invests in private equity funds?

Wealthy investors park their surplus funds in private equity funds. They need to invest large sums and hold for more extended periods. The private equity secondary market provides a way for such investors to exit and others enter. Therefore, it provides liquidity for wealthy investors. Some investors offload their stake in situations like economic turmoil, and the secondary market comes to their rescue.

How the transactions take place in Secondary Private Equity Liquidity?

The firms active in the secondary equity market include Coller Capital, Newbury Partners, AXA Private Equity, AlpInvestPartners, Harbourvest Partners, and Lexington Partners. Below, we cite some secondary equity transactions for an understanding:

Lexington Partners agreed to purchase private equity worth 0 million from Citigroup.

Lloyds banking group agreed to sell a portfolio worth 0 million from its private equity to Lexington Partners.

Bank of America offloads private equity worth .9 billion to AXA Private Equity.

In a nutshell, the funds can sell their equities and realize capital. Liquidity and cash are often limited to partners. It reduces the overhead costs and managerial risks associated with private equity. The fund managers can reallocate funds to another company or diversify their portfolios and improve earns and safeguard from a significant risk in case of a sudden crash or economic turmoil.

Some companies acquire stakes in other companies to gain control over operations and manage. At a later stage, they may liquidate the funds for business expansion or different needs. It arises the need for secondary private equity liquidity. The secondary markets provide cash for Private Equity Funds.

Why Private equity funds?

Several investment bankers prefer liquidity for private equity funds over public equity because they outperformed in the past decade. The private equity funds have received significant demand from individual accredited and institutional investors.

Successful private equity firms are TPG Capital, Apollo Management, Blackstone Group, Carlyle Group, and Goldman Sachs Capital Partners.  The employee count at such firms can range from just two to several employees.  Such funds focus on biotech startups or energy or oil companies for better returns and low risk going forward.

Nyppex Private Markets
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