In the terms of finance, secondary private equity transactions refer to selling and buying of pre-existing commitments of investors to investment funds and private equity. People who sell private equity investments not only sell the investments in funds but also the remaining unfunded commitments to these funds. Naturally, the asset class of private equity is illiquid and is meant to be long-term investment options for investors who believe in buying and holding.
For most of the private equity investments, no listed public market exists. However, there is the secondary market available which is robust and still maturing. Driven by huge demand for the exposure of private equity, most part of the capital is committed to secondary market funds by the investors who are looking to diversify and increase investment exposures.
When you have decided to enter into the market of secondary private equity transactions, you will initially get confused about what is and what is not allowed in this market. Apart from that, you also need to make it clear in your mind that what exactly the secondary market is. For now, you just need to understand that private equity secondary market is the one in which investor commitments are bought and sold.
Private Equity Market a bustling trade which is worth more than 3 billion dollars per year at present. The market includes some of the highest profile companies such as Morgan Stanley Banks and JP Morgan Chase. As the market of secondary private equity transactions can be quite confusing, it would be wise to hire the services of an investment firm. The expert professionals from this service provider will walk you through the entire process.
Basically, secondary private equity transactions are broken into two kinds of transactions. The first one is the sale of the limited partnership interests. These transactions occur when investors with private equity in limited partnerships are ready to sell existing business interests, like buyout, real estate and venture capital in partnership. Thus, these business interests are released to the equity investors.
Another secondary private equity transaction type is selling of the direct interests in a partnership, investment or company. This takes place with sale of the direct funds and investments, instead of limited partnership within the investments. In this type of transactions, the pieces of portfolio obviously go to the buyers.
Do not forget to gain more information from your investment firm as they will tell you that these transactions are great long term investments to diversity your company’s as well as your portfolio.