People love the return premium they can earn by socking away
money in illiquid assets like private equity, until they
To address the conundrum of investors not being able to sell
their stakes when they need to meet unanticipated cash needs,
or when the public markets are under stress, Nasdaq Private
Market is now offering a centralized venue to trade private
equity funds and select mutual funds that invest in illiquid
High-net-worth investors and smaller institutions are
increasingly interested in these investments, but liquidity is
the number one question, says Eric Folkemer, head of
Nasdaq Private Market, which has provided a trading venue for
companies that arent publicly listed since 2013. He says
the web-based platforms regular auctions for alternative
investment funds will spur demand from fund managers, advisers
and investors, as well as more creative fund structures.
Nasdaq recently received the go-ahead from the Securities
and Exchange Commission and the Internal Revenue Service
to expand its private market to include alternative
investment funds, according to Folkemer, who says one of the
primary targets is private equity secondaries. Theres
about $40 billion to $50 billion of private equity secondary
trading a year, and about $100 billion waiting to be invested
in such deals, he adds.
Secondary trading occurs when investors with money locked up
in a private equity fund that has a life of say, 10 years, want
to sell after five. These transactions are typically negotiated
separately outside any centralized market.
Folkemer adds that the market could also help push demand
for alternatives in the defined contribution market. Retirement
plan sponsors and 401(k) participants may be interested in
adding alternative investments to their fund options, but the
current lack of liquidity is a crucial barrier.
The trading of those securities will help create
stronger movement in that industry, Folkemer says.
But thats a longer-term strategy for us.