Liquidity cost of PE investments in the secondary market

Liquidity cost of PE investments in the secondary market.pdf

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In the 1980s, the first transaction in an OTC market of pre-existing private equity funds was made.

There are several reasons for buyers and sellers to trade in this market; sellers are mostly driven by liquidity needs while buyers are motivated by the high attractiveness of the opportunity to buy at a discount to fair value.

In the long run, the market should become more stable and information barriers between buyers and sellers should narrow. This should improve liquidity, lower costs and ultimately reduce discounts to NAV.