Liquidity Provision in the Secondary Market for Private Equity Fund Stakes
61 Pages Posted: 6 Jun 2018 Last revised: 20 Nov 2018
Date Written: November 16, 2018
We estimate the demand for private equity fund stakes in the secondary market using a broker's proprietary data on bids. We show that the demand response to aggregate liquidity shocks is negatively related to contemporaneous bids, and this relationship is stronger for funds that most likely are put for sale in times of low liquidity. We also show that the demand response to aggregate liquidity shocks is unrelated to future NAV-to-NAV returns and to future bidding behaviour. These results are consistent with the variation in discounts in private equity stakes being linked to the variation in liquidity provision in the secondary market for private equity.
Keywords: Private Equity, Secondary Markets, Liquidity, Liquidity Premium, Net Asset values
JEL Classification: G24
Suggested Citation: Suggested Citation