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Alternative Market Briefing

Hedge fund secondary market no longer just an escape route but also a liquidity tool

Thursday, August 01, 2013

amb
Richard Beard
Benedicte Gravrand, Opalesque Geneva:

Trading in hedge fund secondaries has become very popular since 2008, and now more and more investors use it to acquire liquidity.

Apparently, investors were still sitting on an estimated $50 to $75 billion of illiquid and impaired hedge fund investments late last year. This is improving a bit. According to Richard Beard of Stream Capital, an estimated $35 to $40 billion still remain today.

Some fund managers not into it "The ability to sell illiquid assets through the secondary market has encouraged a large number of managers to auction off these holdings and return capital to their investors," Beard tells Opalesque. "However a lot of managers have yet to address the situation."

This is echoed by a recent survey done by Hedgebay, a player in the secondary hedge fund market where Beard used to work, which says "hedge funds … need to be further educated regarding the benefits the market can provide funds seeking additional sources of liquidity."

By and large, institutional investors are happier to use the secondary market than a few years ago. "Deleveraging has played an important reason coupled with a shift to more generic investments and real assets; hence a real need to use the space for opportunity costs," Beard says.

Richard Beard is the ......................

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