Nasdaq Private Market: Meeting the Challenges of Liquidity in Alternative Investments
Nasdaq Private Market (NPM) was founded in 2013 as a direct response to changes in market dynamics and regulation. It was clear that the lifecycle of private companies was being extended due to these changes, and NPM was created to address for the demand for shareholder liquidity programs at private companies.
Since launching NPM nearly four years ago, we have facilitated over $4.5 billion in private company secondary transactions. After collaborating with a broad range of fund managers and financial advisors, we identified a similar product innovation gap in alternative investment funds.
In the past decade, and as alternative investments have grown rapidly, the demand for these products from high net worth investors has also grown. Fund managers continue to seek new product innovations to open access to this new class of investors. New innovations are needed to open up these opportunities, and liquidity is a critical component. Through NPM, fund managers can now provide liquidity to their investors, creating opportunities for new product vehicles and expanding access points to new sources of capital, while maintaining control over the investors permitted in its funds. The Alternatives business will initially support secondary liquidity for private equity feeder funds and funds registered under the Investment Company Act of 1940.
This innovative solution brings together an ecosystem of participants––including fund managers, financial advisors, investors and secondary liquidity providers––to facilitate regular, auction-based liquidity events for alternative investment funds. Through NPM’s automated web-based platform, participants can manage each aspect of the transaction process, including reviewing fund materials, submitting buy and sell interest, executing agreements and facilitating transfer and payment. The product also leverages the blockchain technology enabled by the Nasdaq Linq platform to help streamline the payment process, resulting in faster and more certain time to settlement.
Key features of NPM’s platform offering for Alternatives include:
- Fund managers maintain control over which funds participate in the liquidity events and the investors permitted in those funds
- Eligible Participants obtain controlled access to fund documents and other information
- Secondary liquidity providers place indicative bids across each fund, ensuring deep liquidity and market-driven competitive pricing
- Bids to buy or sell a fund interest are entered directly into the platform, and are automatically matched leveraging pre-determined auction rules
- Standardized agreements are managed and executed via the platform
- Final settlement amounts re calculated and payment facilitated through NPM’s registered broker-dealer
- Reporting is provided to the fund manager or its fund administrator to complete the transfer process
Over the coming months, NPM will continue expanding the Alternatives platform to facilitate additional types of secondary transactions, including direct private equity fund limited partnership interests. Learn more about Nasdaq Private Market’s Alternatives business by visiting www.nasdaqprivatemarket.com/alternatives.
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