Capital Dynamics: Perspectives – a view of the private equity secondaries marketp

The markets continue to be difficult. Banks are still struggling and availability of longer term liquidity remains low. Most major economies are in a recession and it is currently unclear when the bottom will be reached. The global economic difficulties are also reflected in low valuations in the public markets which are increasingly reflected in private equity valuations. This is easing the pressure on private equity allocations. What seems more daunting is the possible liquidity issues that arise once draw downs start to pick up which we expect to happen prior to the increase in distributions. In addition, the current uncertainty drives up secondary market discounts with the result that there are few sellers at the prices buyers are willing to offer. Thus, currently the secondary market is relatively quiet. Much is being evaluated, but little is transacting. However, with increasing stabilization of the economic situation and an increasing liquidity pressure we expect the bid-ask spread to narrow and activity to pick up.