Brian King, CEO of Lodas Markets, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss how advisors can sell illiquid alternative investments in the secondary market.
Lodas Markets operates an SEC-registered alternative trading system (ATS) that provides a secondary market for alternative investments. Over the last 10 years, the percentage of advisors using alternative investments has increased from 30% to 70%. This has led to an increase in AUM and the number of individuals invested in alternative vehicles. With greater allocations to alternative investments comes greater demand to exit these illiquid investments earlier than the funds’ stated redemption schedule.
Investors seek liquidity to exit from alternative funds with a variety of redemption features. Traditional private equity funds have a stated life of ten years, with liquidity only provided on the sale of portfolio companies. Interval funds may offer to redeem 5% of NAV each calendar quarter but can take many quarters or years to redeem once redemption requests exceed that stated level. Investors may also seek liquidity for their holdings in Delaware Statutory Trusts (DSTs) and nontraded REITs or BDCs.
An investor and their advisor can offer to sell their interests in an illiquid fund on the Lodas Markets’ ATS. Most of the offers to sell are at a discount to NAV, which can attract buyers, including advisors, individuals, and institutional investors. The platform includes a data room with the information needed to perform due diligence on the offered funds. Artificial intelligence collects data and regulatory filings on registered funds.
Lodas Markets offers automated tools to assist sponsors in raising new capital. This includes integration of the secondary market with the transfer agent.
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