In the secondary market, securities are sold by and transferred from one investor or speculator to another.
Early history[ edit ] The Venture Capital Fund of America today VCFA Groupfounded in by Dayton Carrwas likely the first investment firm  to begin purchasing private equity interests in existing venture capital, leveraged buyout and mezzanine funds, as well as direct secondary interests in private companies.
It was during this time that the market evolved from what had previously been a relatively small niche into a functioning and important area of the private equity industry.
Prior tothe market was still characterized by limited liquidity and distressed prices with private equity funds trading at significant discounts to fair value. During these years, the secondary market transitioned from a niche sub-category in which the majority of sellers were distressed to an active market with ample supply of assets and numerous market participants.
The continued evolution of the private equity secondary market reflected the maturation and evolution of the larger private equity industry. Pricing in the market fell steadily throughout as the supply of interests began to greatly outstrip demand and the outlook for leveraged buyout and other private equity investments worsened.
With the crash in global markets from in the fall ofmore sellers entered the market including publicly traded private equity vehiclesendowments, foundations and pension funds.
Many sellers were facing significant overcommittments to their private equity programs and in certain cases significant unfunded commitments to new private equity funds were prompting liquidity concerns.
In these transactions, sellers were willing to accept major discounts to current valuations typically in reference to the previous quarterly net asset value published by the underlying private equity fund manager as they faced the prospect of further asset write-downs in their existing portfolios or as they had to achieve liquidity under a limited amount of time.
At the same time, the outlook for buyers became more uncertain and a number of prominent secondary players were slow to purchase assets. In certain cases, buyers that had agreed to secondary purchases began to exercise material adverse change MAC clauses in their contracts to walk away from deals that they had agreed to only weeks before.
As a result, the discount to Net Asset Value offered by buyers to sellers of such assets was reduced. However, activity in the secondary market fell dramatically from levels as market participants continued to struggle to agree on price. Reflecting the gains in the public equity markets since the end of the first quarter, the dynamics in the secondary market continued to evolve.
Certain buyers that had been reluctant to invest earlier in the year began to return and non-traditional investors were more active, particularly for unfunded commitments, than they had been in previous years.
Through the middle ofthe level of activity has continued to remain at elevated levels as sellers have entered the market with large portfolios, the most attractive funds being transacted at around NAV. As the European sovereign debt crisis hit the financial markets during summerthe Private equity secondary market subsequently saw a decrease both in supply and demand for portfolios of interests in private equity fundsleading to reduced pricing levels compared to pre-summer However, the volumes on the secondary market were not expected to decrease in compared toa record year  as, in addition to the banks under pressure from the BASEL III regulations, other institutional investors, including pension fundsInsurances and even Sovereign wealth fund continued to utilize the Private equity secondary market to divest assets.
From througheach of the large secondary fund managers have raised successor investments funds, sometimes exceeding their fundraising targets.
Although the number of transactions was roughly the same as inthe average deal size increased Indeed, the breadth and number of buyers continues to increase with total volume and activity of small and medium buyers becoming more significant. Large buyers accounted for Also driving the expansion of the secondary market is the number of buyers expanding their scope of interest into areas in which they were previously inactive.In finance, the private equity secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds.
Given the absence of established trading markets for these interests, the transfer of interests in private equity funds as well as hedge funds can be more complex and .
Week in Review: Secondary Markets, Super Price Cuts and Seizing Miami Secondary markets soar in the U.S., L.A.'s Owlwood estate gets a generous price cut and why now is the time to buy in Miami. For buying equities, the secondary market is commonly referred to as the "stock market." This includes the New York Stock Exchange (NYSE), Nasdaq and all major exchanges around the world.
Secondary Market Pricing Primary market prices are often set beforehand, while prices in the secondary market are determined by the basic forces of supply and demand.
May 23, · How dynamic pricing influences secondary market sales and, subsequently, the value of secondary market sponsorship deals remains to be seen. In our preliminary analysis of Giants’ tickets in , there appeared to be a strong secondary market despite the presence of a dynamic pricing strategy for all seats in the stadium.
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