XPS Xchange
Institutional Investors only
With XPS Xchange, XPS Investment offers specialist advice to help institutional investors explore and execute the optimum solution for buying or selling illiquid assets.
Illiquid assets are a key asset class for many investors and can help to enhance investment returns to achieve your targets sooner with less volatility.
The Secondary market in illiquid assets has been growing exponentially in recent years, providing a new tool in investors’ toolkits to manage their allocation to these illiquid assets.
However, without support, institutional investors can find themselves experiencing difficulties when trading illiquid assets, including uncertainty and inexperience over a reasonable price to transact, trading costs and timescales.
In recognition of these issues, XPS offers an alternative approach when trading illiquid assets on the secondary market. We aim to work with you to provide clarity and help you capitalise on the opportunities available, whether buying or selling an illiquid asset. From the beginning of our partnership, we will help you to understand the pricing of illiquid assets, the costs involved in trading, and the timeframes to completion if you decide to progress.
XPS Investment uses a 3-pillar approach from our relationships with brokers, secondary managers and other buyers. The service broadens your access to the market and delivers a tailored solution that helps remove traditional obstacles and generate the best value.
Find out what trading opportunities are available for your illiquid assets now
Complete the form below
Whether you are buying or selling, complete the short form below so that we can start to provide indicative pricing on your illiquid assets and find out what trading opportunities are currently available in the market.
Once you've completed this form, we'll get back to you with a complimentary short report consisting of a high-level action plan, along with our insights on what we believe is the pricing of the assets at a recent point in time for the assets you would like to buy or sell. This report is intended for information only, and does not constitute any form of investment advice or recommendation to utilise any particular investment strategies or funds, and should not be relied upon as such.
Alternatively, you can contact us here to arrange an initial discussion: [email protected]. If you have four or more funds to buy or sell, please contact us directly to discuss your specific requirements.
FAQs about illiquid assets and XPS Xchange
These FAQs are provided for information only and are not to be considered as investment or legal advice.
By ‘illiquid assets’ we mean those that cannot be easily or quickly converted into cash. These are often private market assets such as private equity or private debt, but also include investments such as infrastructure or property. Unlike listed equities or bonds, the underlying assets are not often traded on a public exchange and so a buyer or seller needs to be found in order to transact. There are a wide range of illiquid asset classes, and illiquidity can range from monthly dealing through to locking up assets for well over a decade.
The secondary market allows investors to trade illiquid assets (e.g. individual companies, their debt, or illiquid funds) that they hold with other investors. This allows the current investor to realise the asset for cash.
The secondary market for illiquid assets is relatively immature and started to increase in size following the 2008 financial crisis, where many distressed sellers sought liquidity.
Buying and selling illiquid assets
The secondary market is an ever-growing marketplace. Historically, the largest market is in the US, which formed in the 1990’s, with Private Equity funds the most frequently traded asset class. However, a growing number of European Institutional Investors are now trading on the secondary market, with Private Credit, Real Estate and Infrastructure now all frequently traded. Trade sizes can vary from <£5m to £1bn+.
There are many reasons motivating an investor to sell a fund, which can frequently mean they are willing to sell the fund at a discount to their full value. Most often this could be a need for liquidity (such as a Pension Scheme Buy-in) or to rebalance their investment allocation, as opposed to selling an underperforming illiquid fund.
Annual accounts recognise assets at their fair value, most often the fund Net Asset Value (“NAV”) audited by an independent 3rd party, as they are expected to be held until maturity. The accounting gain is independent of the price paid, because the purchase price from a secondary market deal may not reflect fair value, given trading only occurs when a party is a motivated buyer/seller.
General FAQs
The secondary market is used by a very diverse range of investors. This means a wide range of fund sizes are sold, ranging from <£1m to £1bn+. Hence the minimum fund value is very small (c.£1m). We see liquidity increases when fund sizes are £5m+, and hence is suitable for many types of institutional investor.
Legal input (which both the buyer and seller will need to arrange themselves) is required to negotiate the transfer documents. In a secondary transaction, these are typically a Purchase and Sale Agreement (PSA) and a Transfer Agreement (TA). Tax advice may also be required, particularly if there are US investments in the fund.
A secondary transaction may typically be completed from start to end within 3 months, closing at a quarter end. However timescales can range up to 9-12 months. In the 3 month example, during the first month the fund is marketed and buyers show interest. During the second month all interested buyers place a non-binding bid. The most favourable is selected by the seller, who in the third month enters legal negotiations with the buyer.
Timescales depend on a number of factors and as such it is not possible to provide a definitive timescale, the above is provided for indicative purposes only.
XPS Investment Limited is authorised and regulated by the Financial Conduct Authority for investment and general insurance business (FCA Register No. 528774).