Your Money
Some of the most successful investments are made when the need for capital outstrips what is available. Do you remember when Warren Buffett handed General Electric $3 billion of vital cash at the height of the financial crisis? He got a 10% dividend and stock warrants, making a quick 50% over the deal's life. GE was not in a negotiating position. "Insurance is expensive, especially when you buy it from Warren Buffet," a significant GE shareholder said.
Experts now consider private equity secondary transactions as an investment area where supply outpaces demand. But what are they?
Private equity secondaries refer to transactions in which an investor buys an existing interest from primary (original) private equity fund investors. Secondaries have become an increasingly appealing segment of the private equity market, as they allow flexibility for original investors who may want to liquidate or rebalance a portfolio. Buyers of secondaries, meanwhile, may benefit from shorter duration and faster return of capital, potentially discounted access, and enhanced transparency into the underlying portfolio or assets.
At PWM, we diversify public stock and bond portfolios with private equity and private credit when appropriate. Private equity secondaries have become a larger slice of our various private equity strategies.
Understanding Secondaries (4 min video)
source: Blackstone University Online
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