What happens when an investor in a secondary fund wants to sell out early? What does this phenomenon tell us about the nature of liquidity in the private markets?
Interesting take. So do we believe/agree to the concept that there is a Translation Tax i.e. every layer of intermediation results in compounding opacity and thereby making each successive layer harder to price accurately? And if so, doesn't the relationship becomes the asset precisely because transparent pricing mechanisms have been taxed out of existence?
Said more simply, there may be no price at which some shitty empty office buildings should trade. Even if they give it to you for free, you are really signing up for contingent liabilities. So is a tertiaries player really just shuffling deck chairs on the Titanic with LP money?
Thanks Avik - something like that. There needs to be a transfer of assets in some shape or form for liquidity to obtain. The transfer is dependent upon a reliable pricing mechanism based on (at least this is how M&A bankers do it) publicly traded comps or similarly prior transactions.
As for shuffling deck chairs, I think it becomes important to consider the fact that LPs are aware of the challenge involved in illiquid assets. Many of them do have the patience (a primary consideration) to deal with it!
Interesting take. So do we believe/agree to the concept that there is a Translation Tax i.e. every layer of intermediation results in compounding opacity and thereby making each successive layer harder to price accurately? And if so, doesn't the relationship becomes the asset precisely because transparent pricing mechanisms have been taxed out of existence?
Said more simply, there may be no price at which some shitty empty office buildings should trade. Even if they give it to you for free, you are really signing up for contingent liabilities. So is a tertiaries player really just shuffling deck chairs on the Titanic with LP money?
Thanks Avik - something like that. There needs to be a transfer of assets in some shape or form for liquidity to obtain. The transfer is dependent upon a reliable pricing mechanism based on (at least this is how M&A bankers do it) publicly traded comps or similarly prior transactions.
As for shuffling deck chairs, I think it becomes important to consider the fact that LPs are aware of the challenge involved in illiquid assets. Many of them do have the patience (a primary consideration) to deal with it!