Five Articles on the Secondary Market Given Its Significant Role in a Potential Recession
William V. de Cordova
Private Equity Law Report
The 2008 global financial crisis and the early months of the coronavirus pandemic both showed that sharp, dramatic economic downturns can materially alter the trajectory of the private funds industry. Information from those periods is particularly important for fund managers in light of the potential impending recession. Among other possible shifts, the secondary market will likely become more important and prominent in fund managers’ and investors’ plans. LPs will likely look to the secondary market as a source of liquidity when faced with the denominator effect, while sponsors may lean even further into the craze of GP‑led transactions to avoid selling prized assets at subpar valuations. Further, managers of secondaries funds are likely to see a robust number of opportunities. Although the exact impact of a recession on the private funds industry – and the secondary market in particular – remains to be seen, fund managers would be well-served to prepare themselves for that potential development. To assist with that task, and in honor of Labor Day in the United States, this issue of the Private Equity Law Report highlights five articles on the secondary market from its historical archives that provide guidance of particular relevance to fund managers in a potential recessionary environment. Articles in this issue explore the rising phenomenon of traditional PE sponsors launching secondaries platforms; the importance of governance frameworks in continuation funds; material considerations when performing GP‑led restructurings; analysis of how the secondary market was impacted during the coronavirus pandemic; and ways representation and warranty insurance can be adapted to secondary transactions. Next week (the week starting September 12, 2022), the Private Equity Law Report will resume its normal weekly publication.