03/02/2010 Author: Tony Griffiths

Investors flock to secondary market

Record numbers of hedge fund investors are currently entering the secondary market space, taking advantage of record discounts and the renewed interest in hedge fund investment.

Culross Global Management, a UK-based fund of hedge funds (FoHF), is one of many firms currently exploring the sector and is engaged in a number of fresh negotiations, having recently launched a new FoHF designed to trade, in part, in the secondary market.

“There’s more liquidity in the secondary market, month-by-month, than there was last year,” says Chris Keen, a partner with Culross. “There is a steady stream of people that don’t want the hassle and aggravation of owning these assets, and would rather sell them for what the market will allow.”

In December, Hedgebay – the secondary market’s leading index – saw the average discount on hedge fund assets drop to a record low in the sector’s 11-year history, down to just under 80% of the Nav. Only one trade took place at anywhere near Nav, at 97%, the firm said.

The Florida State University, which manages a $399m endowment, is also considering hedge fund purchases in the secondary market.