--Corrie Driebusch
Secondary transfers of entire investor hedge fund interests are slowing down and will become rarer as liquidity returns, according to Adam Gale, member of the private investment funds group at Orrick, Herrington & Sutcliffe.
In the first and second quarters many hedge fund managers permitted investors to sell entire interests in their funds on a secondary market, a result of newly-imposed gates and investor need for liquidity. Gale said these transfers of entire stakes differ from the sale of only illiquid share classes and now that returns have improved, gates are being taken down and, most importantly, investors are no longer as strapped for cash.
A person familiar with HedgeBay—the online secondary marketplace—confirmed that HedgeBay is seeing investors conducting mostly illiquid trades.
Late last year and early this year the secondary market saw great volume (totalalternatives.com, Nov. 20), as investors tried to sell-off illiquid shares in funds which imposed long lockups and limited redemptions. Gale believes that Dutch auctions are decreasing but he said that those funds which still have large illiquid positions may still benefit from them. Gale’s firm conducted the first Dutch auction for a hedge fund earlier this year.
This article was originally published in Alternative Investment News.
