2011 Saw Increase In Secondary Market Players, Trades

Feb 17 2012 | 12:35pm ET

Secondary market trade volumes in 2011 surpassed those of 2010, as the number of participants increased, reports Hedgebay.

The data provider believes 2011 may prove to be a significant year in the history of the secondary market.

Prices remain volatile in the market, as more participants use it to access high-performing hedge funds and ditch illiquid assets. In Q4, trades were completed at 1% and 100% of NAV, “clearly showing the dispersion of assets being traded,” says Hedgebay.

The average price of completed trades was equally volatile, falling from 79% in October to 65% in November, before rising again 86% in December—its highest value for the year. Lindsey Clavel, Hedgebay’s managing director for Europe, believes the rise in price from November to December is an encouraging sign for investors.

“In the years since the crisis we have seen the average price drop in December, as investors eager to clean up their portfolios for year-end settle for lower prices for their illiquid assets,” said Clavel in a statement. “The fact that the average price rose to a year-long high, combined with the high level of trading volume, may signal that the market is finally coming to terms with its liquidity issues.”

Clavel added that in addition to the increase in trade volumes and arrival of new participants, Hedgebay has noted “subtle shifts of behavior from secondary market users, with improving cooperation between managers in fostering the industry.” For him it, this “all adds up to a deeper and more mature secondary market, and we believe this will attract even more participants to the market in 2012. We expect another year of growth and evolution of the market next year.”

While the year saw the entry of new services providers into the industry, it also saw the exit of a high-profile provider. Clavel warned  that increasing the number of competitors will result in stiff competition among providers:

“We see it as a boon for the secondary market to have a number of providers competing for investors, and this competition has undoubtedly contributed to both the size and professionalism of the industry. However, as that trend increases we will see the best providers flourish, while others may exit. This will ultimately benefit the industry’s maturation. Hedgebay pioneered the market twelve years and almost $6 billion worth of trades ago, and it is exciting to see the market how much the industry has evolved since then.”
 


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