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Thursday, March 28, 2024

Hedge Fund Secondary Interest Prices Pick Up Modestly From Record Low December Levels, Still Far Below Average

Courtesy of Tyler Durden

One aspect of the capital markets that has not seen a comparable pick up in risk and pricing levels as the broader market, has been trading for secondary hedge fund LP interests. Web site, Hedgebay, which is a primary and secondary hedge fund interest auction marketplace, and tracks the prevailing price of LP interest clearance, has released its January data set. After hitting an all time low in December at 79.78% of NAV, average trade prices have picked up substantially and hit 87.93% in January. Yet this is materially below the long-term average in the upper 90s.

From Hedgebay:

January’s index value increased by almost 8 points thanks in large part to some heavy trading in “more liquid” issues – funds that were not gated or impaired, but which investors found themselves still within the lock-up period. Dispersion widened again to more than 64 points with meaningful volume transacting towards the lower end of the range.

For the second month in a row activity in private equity related issues was substantial. As the quarter progresses and year end statements are delivered to investors there should be an even greater focus on this asset class. Credit is still and should continue to be heavily traded this year. While some stability has returned to these markets, most believe the underlying fundamentals have not changed all that much and that the “concept” of credit is still quite fragile. As a result,  prices have been muted in what is expected to be a longer work-out time frame.

Indeed, the smartest money is still very much tepid when purchasing pieces of one another other. Luckily, with robots, vacuum tubes, and retail momos still precluded from participating in this market, this could be one of the very few truly transparent price discovery mechanisms left. And with the top two strategies trade being the very liquid Relative Value, and Credit sectors, and over half a billion in open interest, it is not possible to make the argument that illiquidity is a major gating factor to getting transactions done.

Indicative major supply of interests (i.e., stakes for sale) in the past ten days consists of the following offers:

  • Thames River Warrior: 14MM
  • Blue Mountain: 7.6MM
  • Medley Opportunity: 5.7MM
  • EQT Infrastructure: 5.2MM
  • Kingate Global: 5MM
  • Brevan Howard: 3MM

These are the hedge funds (and amounts) in which investors have expressed a buying interest:

  • Palomino: 4MM
  • Paulson Credit Strategy: 2MM
  • Cheyne Special Situation: 1MM

And here are the largest stakes that are currently available on the market:

  • Ahab: 15MM for sale
  • Bluemountain: 16MM for sale
  • Irongate: 15MM for sale
  • Magnetar: 25MM for sale
  • Plainfield: 32MM for sale
  • Polygon Global: 50MM for sale
  • QVT: 20MM for sale
  • TPG Axon: 15MM for sale
  • Marathon: 12MM bid
  • Ore Hill: 22MM bid
  • Pacific Harbor: 15MM bid
  • SerVertis: 50MM bid
  • Viking Global: 20mm bid

Also someone is rather interested in bailing on Stevie Cohen, with 3MM for sale in SAC Capital Intl., and 3.5MM for sale in SAC Multi Strategy.

The full market per hedgebay is $244MM in bidside interest and $411MM in interests for sale. The desire to sell hedge fund stakes is almost double that of buying.

Full Hedgebay report

HedgebayIndexEdition5-January2010(SMI)

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