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Glossary

Secondaries

Secondaries refer to the purchase and sale of existing interests in Private Markets funds on the secondary market. Investors can thereby create liquidity before the end of a fund's term, while buyers gain access to a portfolio that is already partially invested.

At a glance

  • Secondary market transactions provide liquidity in an otherwise illiquid market segment.
  • Buyers of Secondaries typically acquire an already-built, diversified portfolio of positions.
  • Pricing risk and the quality of the acquired positions are key factors to consider.
  • The market has two basic forms: LP-led, where an existing investor sells a fund interest, and GP-led, where the fund manager itself transfers holdings into a new vehicle, usually to allow more time to build value. The first question in any review is who initiated the transaction.
  • One route of access in Switzerland is the Limited Qualified Investor Fund (L-QIF), available since 1 March 2024. It is open only to qualified investors, requires no authorisation from FINMA and is not supervised by it; only the managing institution is supervised (Source: FINMA).

Frequently asked questions

Secondaries offer the advantage that part of the typical J-Curve has already been traversed and the portfolio is already visible. However, secondary market transactions require careful valuation of the acquired positions, and prices may be above or below net asset value.
Not in itself. A discount may compensate for the time value of money, but it may equally reflect a view on the quality of the positions acquired or on the remaining term until realisation. Net asset value is the seller's valuation at a cut-off date, not a market price. That is why the work in Secondaries lies in examining the individual holdings, not in comparing two figures.

Part of the topic

Private Markets

Sources: FINMA