The Citco Banks, recognized world leaders in custody and fund trading for financial institutions and fund of funds, have expanded its secondary markets desk for its fund of fund and institutional client base to help facilitate investors’ access to liquidity, along with helping fund managers to reduce the redemption pressure on their funds.
In the midst of the current financial crisis, many fund investors across the globe wishing to redeem their investments discovered that they were unable to retrieve their money due to suspension, gating provisionsand lengthy lock up periods.
In response, the Citco Banks have expanded its secondary markets desk to now cover private equity funds, real estate investment trusts and closed end country funds. These markets are now covered in addition to its secondary market hedge fund desk which the Citco Banks has been active in for the past 15 years.
The majority of Secondary Market transactions are negotiated transactions between the buyers and sellers with Citco acting as a broker. Transactions are conducted as follows; interests of buying and selling positions are advised directly to Citco. These interests are either matched are else they are added to Citco’s supply + demand listings which are regularly sent out to perspective buyers and sellers. Once a party is interested in a position, they contact Citco who negotiate an agreed price between the buyer and seller.
Once the terms of the transaction have been agreed, Citco will then contact the underlying fund manager to request approval for the transaction. Working with Citco Fund Services, the world’s leading provider of hedge fund services, Citco Bank oversees all elements of the transaction including execution, settlement and recording on the books of the fund. If required, the Citco Banks also offer Special Purpose Vehicles (SPV) to settle the transaction ensuring that it remains confidential between buyers and sellers.
Willem Holst, managing director of the Citco Banks, commented: “The current financial crisis has created a serious liquidity issue for investors, which is putting enormous pressure on fund managers. We have expanded our secondary markets dealing team to facilitate existing investors’ access to liquidity but also to reduce the redemption pressure on funds so that underlying positions do not have to be sold to cover redemption payments. This is a way of helping to retain capital in the fund and also offers an opportunity to introduce new shareholders to the fund.”
Séan Moran, senior vice president, Citco Bank Nederland N.V. – Dublin Branch, added: “We believe in transparency and trust in our dealings with both Managers and Investors, which are critical for Secondary Market dealings. Even though most of the deals tend to be relatively straightforward, we have vast experience in Citco of more complex transactions. We always do our best to come up with workable solutions for all counterparties in the transaction.”
