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Warning on secondaries market
Investors have been warned against investing in the secondary market for private equities on the basis that it could be subject to a buy-out bubble.
The warning has come from Watson Wyatt, which suggested an anticipated supply-demand imbalance that would allow buyers to dictate prices has so far failed to materialise.
Commenting on the research findings, Watson Wyatt Australia’s head of portfolio construction and diversity, Ross Barry, said the company remained relatively cautious about investing in secondaries.
“Many potential sellers have not yet experienced sufficient liquidity problems to be considered distressed sellers,” he said. “As such, they are opting to hold onto their positions rather than sell at a deep discount on the secondary market.”
Barry said in addition, there were many new buyers, enticed by potential attractive returns, adding to overall demand and the combination of these factors had effectively reduced a perceived supply-demand mismatch between buyers and sellers, which secondary managers and intermediaries had been advertising for some time.
AUTHOR
Mike Taylor
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