SAN FRANCISCO - At a time when many pension funds are fresh out of cash for new private equity investments, along comes PrivateTrade to help solve the problem.
The company was designed to offer a secondary marketplace for institutional investors in private equity. It already has signed up numerous pension funds, including the $32.7 billion Public Employees' Retirement Association of Colorado, Denver, and the $13.6 billion San Francisco City & County Employees' Retirement System, said Chief Executive Officer Kathleen Powers Dunlap.
"The idea is to give both buyers and sellers a better way to trade private equity and provide them with much-needed liquidity. The typical private equity partnership is 10 to 12 years, whereas a secondary partnership is much shorter, ranging from four to seven years," she said.
San Francisco-based PrivateTrade expects to complete its first transaction by the end of the quarter. It will grow slowly initially, and do no more than 30 trades its first year.
Both sides have expressed interest. The sellers are limited partners that might be overallocated to the asset class and can't wait eight to 10 years for the partnership to conclude in order to raise cash, while the buyers include pension funds that are new to the asset class as well as general partners and funds of funds that often buy secondary interests. Sellers will be able to post their offerings in a protected environment, so no one will know who is selling or why, said Ms. Dunlap.
PrivateTrade will make its money from commissions, which will be negotiated based on the size and complexity of a transaction; fees for posting interests for sale; and annual membership fees of $2,500, which will be waived for everyone the first year, and permanently for pension funds, endowments and foundations.
The company is backed by James A. Kohlberg, managing partner of Kohlberg & Co., a New York-based private equity firm, who recruited founder John Dominguez, now managing director business development.