Reconcentration of Wealth

A recent development is a further indication of how bad things have gotten in the capital markets.  Large LPs are looking to offload parts of their private equity and venture capital assets, as reported by Henry Blodget.

... some Limited Partners are reportedly urging funds to delay capital calls and reduce fund sizes.
selling down portions of other asset classes.
… looking to sell private equity assets on the
secondary market, even at drastically reduced prices.

One thing worries me here.  These are sophisticated asset manager doing the selling, in a buyers' market.  So who will be those buyers?  They will likely be sovereign wealth funds, conservative large family offices, and maybe some lucky hedge-funds – the only players with the decision making power and liquidity that would be available to make purchases like this in today's risk-averse environment.  Otherwise, no entity with a large shareholder base will have the guts to make this move.  It's CYA time in those neighborhoods.

The fact that they sellers are smart guys means these were, at least at one time, well thought out investments.  The reality of the buyers' market we're in means that these assets will likely change hands at some discount.

In other words, you have relatively high-quality assets, being sold relatively cheaply, by groups with a diverse shareholder bases (i.e. pension funds, etc.) to buyers who represent narrow shareholder bases (i.e. family offices, hedge funds).

Is this a case of the rich getting richer?  I guess if sovereign wealth funds are buying, it helps diffuse the situation but I can't say I understand how those investment vehicles really work.  It should mean that the fund represents the citizens of a country, which is a very diverse shareholder base, but my skepticism prevents me from buying that argument.

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