A Second Look at the Secondary Private Equity Market

Abstract

Until recently, secondary private equity was a relatively small niche of the private equity market, and little research on the area had been conducted. During the last 10 years, specialists who buy partnership interests in existing private equity funds have benefited from an inefficient market, and they have produced very impressive results. The current market opportunity for these specialists is largely due to recent record-breaking fundraising and a market downturn that increases the ranks of motivated sellers. However, secondary private equity specialists face a number of challenges, including a bevy of low-quality secondary opportunities, the possibility of informed sellers, and competition from primary fund-of-funds “dabbling” in their marketplace.