In the secondaries market, what is being traded?

In the secondaries market, existing stakes in private equity funds are being traded. This market specializes in transactions involving previously invested capital in private equity, venture capital, or real estate funds, allowing investors to buy and sell their interests in these funds. Investors who wish to liquidate their positions in a fund can do so through the secondaries market, providing liquidity and opportunities for other investors to acquire discounted stakes in established funds.

Trading existing stakes allows for a more dynamic investment landscape, as it facilitates price discovery and provides buyers with access to mature funds that may have a proven track record and existing portfolios. This is in contrast to new investments in start-ups or government securities, which do not fall under the purview of the secondaries market. Futures and options contracts also belong to a different financial market, focusing on derivatives and leverage rather than ownership stakes in private equity funds.