Nasdaq Private Market has launched a platform for trading of private equity fund interests in an effort to improve liquidity and enable smaller investors to access the asset class.
The online exchange, NPM Alternatives, will initially focus on servicing private equity feeder funds. These vehicles are typically used by high-net-worth-individuals to invest in private equity.
“The wealth management groups, the independent advisors, those high-net-worth investors today don’t have a secondary solution,” Eric Folkemer, head of Nasdaq Private Market, told Secondaries Investor. “There is no market servicing a $100,000 to $250,000 interest.”
Liquidity is one of the top concerns for HNWIs investing in private equity, Folkemer said. “It is a totally different liquidity preference for an individual investor than a large institutional investor. They’re comfortable with longer-term lock-ups. An individual is very different.”
The minimum subscription amount varies according to the feeder fund: for some it is $100,000, but registered funds can have a minimum as low as $25,000.
NPM plans to expand the platform to facilitate exchanges of limited partnership interests over the coming months, according to the statement.
The platform, which allows participants to review fund materials, submit buy and sell bids, execute agreements and facilitate transfers and payment, is the latest in a string of recent initiatives by Nasdaq focused on boosting liquidity in the private markets space.
NPM uses an algorithm to aggregate buyer and seller interest over a 30-day period during a given quarter, and fund interests can be traded each quarter through an auction process. Buyers are therefore able to acquire multiple stakes in a fund in one trade, resulting in a larger block position, Folkemer said.
General partners can register their funds with NPM so that consent is obtained before an auction starts, and managers know the eligible buyers beforehand, negating administrative processes associated with trading fund stakes, he added.
In October the firm teamed up with investment bank Scenic Advisement to develop end-to-end private placement services to help private companies obtain liquidity through the secondaries market.
A year prior to that the firm had acquired SecondMarket Solutions, a direct secondaries platform that helps private companies, their employees and investors sell securities, mainly through tender offers.
The launch of NPM Alternatives also follows similar efforts to boost liquidity in the alternatives space to attract more individual investors. In January advisory firm and placement agent Mercury Capital Advisors launched Mercury iFunds, an electronic exchange for the trading of alternatives positions that allows investors to gain exposure to private funds with a minimum subscription of $100,000.