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07/04/11

A bumper 2011 for the secondary market

A bumper 2011 for the secondary market. This is the prediction of leading research firm Preqin published in their March special report entitled “Secondary Market Outlook”. Whilst the report focuses predominantly on PE investments, Shelley capital believes that most of the trends apply to the secondary market of hedge funds as well.

Supporting the market is $10.8bn raised in 2010 by dedicated secondaries funds. This is in addition to $22.8bn secured in 2009, providing a substantial amount of capital to be invested in the secondary market.

With the secondary market getting more established, the number of players is rising and the profile of participants is becoming more institutionalised: Preqin shows that pension funds public as well as private, foundations, endowments, insurance companies and banks are getting more comfortable dipping their toe in the secondary market.

A number of specific drivers are also creating extra interest from institutions. New regulations like Basel III and the Volcker rule for example are forcing some institutions to reduce their illiquid exposures. Secondary market buying also holds undeniable attractions for institutional investors: accessing fairly mature funds to avoid negative returns, diversification benefits, ability to buy at a discount to NAV and cheap access to top performing managers.

To see a full copy of the report, please see the attached Pdf. Preqin Special Report: Secondary Market Outlook for 2011

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