The Private Equity Secondaries Market During the Financial Crisis and the 'Valuation Gap'

Journal of Private Equity, Summer 2011

https://doi.org/10.3905/jpe.2011.14.3.042

Posted: 21 May 2019

See all articles by Ulrich Hege

Ulrich Hege

Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Alessandro Nuti

affiliation not provided to SSRN

Date Written: April 1, 2011

Abstract

This descriptive paper analyzes the performance of the private equity secondaries market during the financial crisis 2008-2009, in order to understand the effective liquidity of private equity investments during this episode of market stress. We document that the secondaries market followed the development of the crisis very closely, with effective market liquidity contracting in early 2009 to only a fraction of the volume earlier, and a quick recovery afterwards that showed no signs of more protracted turbulences than the stock market. We argue that the particular form of illiquidity in the secondaries market can be best understood as the cumulative effect of behavioral and accounting-based elements. The available evidence indicates that the liquidity and the relative resilience of the secondaries market are efficient.

Keywords: private equity secondaries, private equity, non-tradable assets, illiquidity

JEL Classification: G01, G24, G34

Suggested Citation

Hege, Ulrich and Nuti, Alessandro, The Private Equity Secondaries Market During the Financial Crisis and the 'Valuation Gap' (April 1, 2011). Journal of Private Equity, Summer 2011. Available at SSRN: https://ssrn.com/abstract=2012538

Ulrich Hege (Contact Author)

Toulouse School of Economics ( email )

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HOME PAGE: http://https://www.tse-fr.eu/people/ulrich-hege

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http:/www.ecgi.org

Alessandro Nuti

affiliation not provided to SSRN ( email )

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