Liquidity Provision in the Secondary Market for Private Equity Fund Stakes

61 Pages Posted: 6 Jun 2018 Last revised: 20 Nov 2018

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Johan Cassel

University of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance

Ludovic Phalippou

University of Oxford - Said Business School

Enrique J. Schroth

EDHEC Business School; Centre for Economic Policy Research (CEPR)

Date Written: November 16, 2018

Abstract

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

Albuquerque, Rui A. and Cassel, Johan and Phalippou, Ludovic and Schroth, Enrique J., Liquidity Provision in the Secondary Market for Private Equity Fund Stakes (November 16, 2018). Available at SSRN: https://ssrn.com/abstract=3182481 or http://dx.doi.org/10.2139/ssrn.3182481

Rui A. Albuquerque

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Johan Cassel

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

Ludovic Phalippou

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Enrique J. Schroth (Contact Author)

EDHEC Business School ( email )

393, Promenade Des Anglais
Nice, 06202
France
+33493186939 (Phone)

HOME PAGE: http://https://www.edhec.edu/en/faculty-and-researchers/schroth-enrique-phd

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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