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Bailey McCann, Opalesque New York: Cattegatt, a specialist broker and advisor for secondary interests in private equity limited partnerships and illiquid hedge funds, sees an improvement in pricing for hedge fund side pockets this year. Investment holding periods in the underlying side pockets have shortened, making illiquid securities more attractive, according to new research from the firm.
The $100 billion market for illiquid hedge fund side pockets started in 2009 and was predicted to last for one or two years until it was cleaned up i.e. the illiquid holdings had been realized and turned into cash. The market recovery lingered however, causing slower than anticipated conversions. The improved economic climate over the last six months, has increased the activity of deal flows from investors.
There has been a surge in interest for hedge fund side pockets from an increasing number of buyers. Prior to 2013, the secondary market was dominated by a few highly informed specialised investors, since then, and especially this year, a wider audience of alternative investors have started to bid on these assets, as a result of the lower perceived risk due to the improved climate, bringing more clarity to the underlying values.
While previous years may have been characterised by larger portfolio sales from forced sellers and only a handful of buyers, deal flow seen by Cattegatt over the last 12 months has featured an increased amount of smaller pieces from motivated...................... To view our full article Click here
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