Keywords

private equity, secondary market for private equity funds, liquidity, transaction costs

Abstract

This paper uses proprietary data from a leading intermediary to explain the magnitude and determinants of transaction costs in the secondary market for private equity stakes. Most transactions occur at a discount to net asset value. Buyers average an annualized public market equivalent of 1.023 compared with 0.976 for sellers, implying that buyers outper- form sellers by a market-adjusted 5 percentage points annually. Both the cross-sectional pattern of transaction costs and the identity of sellers and buyers suggest that the market is one in which relatively flexible buyers earn returns by supplying liquidity to investors wishing to exit.

Original Publication Citation

“The Liquidity Cost of Private Equity Investments: Evidence from Secondary Market Transactions,” (with Taylor Nadauld, Berk Sensoy, and Michael Weisbach), 2018, Journal of Financial Economics.

Document Type

Peer-Reviewed Article

Publication Date

2019

Publisher

Journal of Financial Economics

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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