How The Secondaries Market Can Unlock PE Liquidity In A Recessionary Environment

After an unprecedented bull run for private equity in recent years, with investor returns generally outpacing the public markets, current negative economic conditions have created significant headwinds for the private funds industry. Many institutional investors are feeling the squeeze of the ongoing public market decline and the looming recession. We believe that this will result in an increased shift towards unlocking investor liquidity through the secondaries market.

The looming liquidity crunch

As a result of a precipitous drop in public markets in the past year, many limited partners are currently overallocated to private fund holdings. This is in part because of the "denominator effect", caused by the immediate markdown of their public holdings and the corresponding shift in the weighting of their private fund holdings which have yet to be revalued—making it difficult for them to commit additional capital to primary investments in fund interests until a