In the world of finance, the secondary private equity transactions deal with selling and buying of pre-existing investors commitments not only to private equity but also other alternative investment funds.
Large numbers of institutional investors and dedicated firms engage in most of the secondary private equity transactions, such as Coller Capital, Lexington Partners, Paul Capital, Partners Group and Pantheon Ventures. In addition to these, some major investment banking firms also have active involvement in secondary private equity market.
Within the secondary private equity market, some smaller firms focus on buying direct investment portfolios in operational companies. Other niches include purchasing interests in secondary funds and also real estate funds. If you have decided to invest in the secondary private equity market, then you can seek consultation not only from investment banks but also from electronic exchanges, placement agents and dedicated boutique investment firms. As this market has been perceived to be a growing opportunity, there has been a significant increase in the number of consultants out there.
Basically, secondary private equity transactions are divided into two categories: Sales of limited partnership interests and sales of direct interests. The former type of transactions include sale of investor’s interest in private equity funds through transfer of investor’s limited partnership interest in the fund. Sales of direct interests refer to sales of direct investment portfolios in operating companies, instead of limited partnership interests in the investment funds. Sales of limited partnership interests are carried out through several structured transactions including stapled transactions and structured joint ventures.
While making the secondary private equity transactions, you will get confused about what is and what is not allowed in the market. As these transactions are meant for long term investments, no public market is involved in these. If you are an entity looking for ways to diversity your portfolio via private equity, then secondary transactions are the sure shot solution for you.
The market of these transactions is a bustling one having a worth of more than 3 billion dollars every year. In addition to that, it also attracts several high profile companies every year including Morgan Stanley banks and JP Morgan Chase. Because making these transactions can be really confusing, you should allow your investment consultant or investment firm to guide you through the entire process.
Do not forget to contact your consultant to get more information on the secondary private equity transactions, so that you can make most of the profits out of the transaction that you make.