Fire Sale: Private Equity Hits The Bargain Bin!

Investors at private equity firms are selling their stakes at steep discounts, according to our sources. The limited partners sell their outstanding positions and any future commitments to the fund in exchange for capital now, giving up the potential upside in favour a immediate payment.

“Depending on the amount of commitment outstanding, these positions have been marked down anywhere from $0.30 to $0.70 on the dollar,” a source familiar with this new market tells us.

Stakes in private equity funds are generally not freely transferable. But according to our sources, the private equity funds have been quietly approving large transfers for some time. They don’t want the pricing information leaking out, of course, for fear of scaring other investors. Those selling their positions also are hesitant to publicize the trades for fear of triggering writedowns on other private equity stakes.

The development of this market is quite new. Until recently, the stakes in private equity funds rarely traded. Now investment banks have begun listing stakes available and promoting them to clients. It’s still very hush-hush right now. But we’re told the trading volume has escalated precipitously in the last month.

The trading in the private equity stakes is widespread among a number of investment banks, we’ve now learned.

Earlier:

  • A Growing Seconary Market In Private Equity Stakes

 

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