Understanding Private Equity Secondary Funds

Secondary funds are a type of private equity product that can provide investors with a quick and relatively inexpensive way to take advantage of private equity opportunities. Secondary funds are made up of existing interests in private equity funds, purchased by a secondary investor from the original investor.

Secondary investment is often made when the original fund cannot sell or liquidate its interests, given the time and expense required to do so properly. Secondary investors can take advantage of liquidity and value creation opportunities in existing funds, as they gain access to already invested assets, enabling them to invest at a later stage in the financial cycle, at reduced risk.

Secondary Funds are aimed at institutional investors, fund managers, mediators, closed-end funds and those looking to fill gaps in their private equity portfolios. Access to secondary funds is generally limited, as sellers must be qualified for this type of investment.

Secondary funds are specific investment products that offer a unique combination of liquidity and value creation. They can be profitable and attractive for short- and medium-term investors, often providing more liquidity and diversification than initial investments. However, Secondary Funds need to be carefully studied and evaluated by investors to ensure that they are suitable for their respective investment objectives.