The importance of secondary funds
as part of the private equity asset class has grown significantly
over the last few years. Investors
have come to appreciate the attractive investment characteristics
of these funds:
- Diminished J-Curve effect.
Unlike newly formed private equity partnerships (“primary
secondary funds generally do not experience negative returns
during the first few years after their formation (the so called “J-curve”). Instead,
the buyer is closer to the time when a fund is more likely
to generate distributions, thereby, improving the ultimate
- Lower investment risk.
Secondary transactions typically occur after most of a primary
investments have been identified, providing the secondary buyer
with the opportunity to analyze and value specific companies
in a portfolio.
- Shorter duration.
Because they avoid the first few years of a primary fund’s
holding period, secondary funds offer a shorter duration than
Secondary funds can provide investors with a diversified pool
of partnership interests that not only enhances the returns of
an existing portfolio of private equity investments, but also
provides new investors to the asset class with an opportunity
to jump start their program by seeding it with relatively mature
For additional information, please [contact us].