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Alternative Market Briefing

White paper: Supporting investment thesis for secondary funds

Wednesday, October 23, 2019

B. G., Opalesque Geneva:

Secondary funds offer faster return of capital, wide diversification, and a notable downturn protection that might fit those who want to invest in a countercyclical way today, says Moonfare GmbH, a German private equity platform, in a new White Paper on private equity secondaries.

The implementation of new regulation in the mid-90s introduced requirements for commercial banks and insurance companies to hold higher capital reserves to support their alternative asset investments. This fuelled the need for a secondary market, as institutions moved to reduce their exposure. This is how secondary focused funds launched into existence, the paper explains.

Secondary transactions are done over the counter and can be classified in three main categories:

1. LP secondary transactions, the most common kind, in which an existing LP sells its fund interest(s) in private market funds to a secondary buyer.

2. GP restructurings, in which the portfolio companies are transferred to a new fund vehicle.

3. Direct secondary transactions, where an investor sells a portfolio of companies to a secondary buyer.

According to Bain Capital's 2019 Global Private Equity ......................

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