This week’s chart looks at median secondary market pricing for private equity fund interests. Because private equity is an illiquid asset class, investors that have private equity portfolios and need immediate liquidity must sell their interests in existing private equity funds to other investors. This is called the “secondary market”, which has grown substantially since the credit crisis; over $20 billion of fund interests traded hands in 2013 on the secondary market. The above chart shows that in the immediate aftermath of the credit crisis, during 2009, buyers required a steep discount to net asset values to assume the risks of existing fund interests. At the bottom of the market, during the second quarter of 2009, sellers received just $0.30 on the dollar if they decided to sell their private equity investments. However, as the crisis abated those steep discounts vanished. Pricing was particularly aggressive in 2013 with secondary buyers requiring only a 7–10% discount to net asset value. Given these modest discounts, it appears the opportunities in the private equity secondary market are scarce these days.

As LinkedIn’s highly successful IPO commanded lofty valuations and headlines across the financial press, commentators began drawing parallels to the hot IPO market that preceded the tech collapse at the end of the last decade. Although it has likely been ten years since a new company listing has generated so much buzz, the state of the equity IPO market in the U.S. has a long way to go before reaching the levels seen in the late 1990’s. Through the end of May 2011, 95 new deals came to market raising aggregate proceeds of nearly $30 billion. With a backlog of companies expected to go public in the second half of the year, 2011 is projected to surpass the improved totals recorded in 2010. The offering market has seen a revival since 2008 when only 58 companies went public, but is still a long way from the types of numbers seen in 1999 when 549 companies listed raising over $90 billion.