Private equity secondary transactions

Holger von Daniels

2004

Private equity is usually invested in closed-end funds. Secondary transactions, i.e. the early sale of private equity shares, are therefore complex and entail high discounts. The creation of an institutionalized secondary market would amount to a small revolution.

In his thesis "Private equity secondary transactions. Opportunities and limitations of creating an institutionalized secondary market" Holger von Daniels examines whether the introduction of an institutionalized secondary market can render secondary transactions less complex. He also investigates whether discounts can be avoided, thus reducing illiquidity in the market. He shows a number of obstacles to the establishment of an institutionalized secondary market. Yet he also comes up with solutions and concrete theses for the creation of such a market, based on a number of interviews and case studies. The resulting business model addresses important elements of the current private equity business.