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ARTICLE · 22 JULY 2020

Preferred Equity: Another Option In The Fund Finance Toolkit

Mayer Brown
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The market for private equity (PE) secondaries, or the buying and selling of pre-existing PE fund interests, has grown rapidly over the past decade—by one estimate, at a CAGR of approximately 40% from 2013 to 2018.

United StatesFinance and Banking
Mark Uhrynuk
Mark Uhrynuk
Todd Bundrant
Todd Bundrant
Mark Dempsey
Mark Dempsey
Alexander W. Burdulia
Alexander W. Burdulia
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Introduction

The market for private equity (PE) secondaries, or the buying and selling of pre-existing PE fund interests, has grown rapidly over the past decade-by one estimate, at a CAGR of approximately 40% from 2013 to 2018.1 Within this sophisticated market, traditional secondaries, in which limited partners (LPs) sell their PE fund interests to third parties, have proven to be a relatively dependable source of liquidity for LPs looking to exit a fund early in most market conditions. As with many aspects of the global economy, however, the market for traditional secondaries is now experiencing a period of depressed activity and an uncertain future. Some commentators predict an uptick in these transactions in the second half of 2020, beginning shortly after the publication of Q2 financial reports, but others expect activity to remain depressed until at least the beginning of 2021. Meanwhile, PE portfolio companies and LPs are experiencing the same degree

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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