Auction platform allows pensions funds and insurers to trade LP-led stakes.
Defined benefit (DB) pension schemes seeking a buyout but are being held back by an inability to sell illiquid fund positions will soon be able to trade their positions on a new platform, which is being launched today.
Sellers typically have to accept a discount from the net asset value of their private fund stakes. MeltX has been designed to enable pension funds, insurers and advisers to efficiently sell LP-led secondaries through a transparent, centralised bidding platform with a quarterly auction.
The co-founder of MeltX Olli Jaegemann, a former CEO of the Asset Management Exchange, told PMP ahead of the launch: “When it comes to secondaries, net value trumps costs. If you are selling a fund on the secondary market, this often comes with a discount to the net asset value. Sellers need to be comfortable that they are getting the best offer available for that fund and maintaining the most value for their stakeholders.
In addition to the pricing issue, the key benefits of MeltX are “the transparency and competitive tension provided by a platform that any credible buyer can access”, according to Jaegemann said.
By connecting stakeholders on an online platform and streamlining the process, independently-owned MeltX could potentially help narrow the gap between the buy and sell prices of secondaries.
The UK’s £1 trillion+ pension sector is experiencing four key trends that involve secondaries: DB schemes going to buyout; DB schemes running-on to capture surplus; investing in UK private markets and net zero; and LGPS consolidation.
Global secondaries market volumes have been increasing strongly in recent years. Some industry participants suggest the higher levels of diversification and dispersion of secondaries over primary funds mean they are particularly suitable for core holdings in large defined contribution pension schemes including master trusts.
“Having a more efficient and effective secondary market for illiquid funds in the UK could have significant benefits relating to the Mansion House reforms and other key trends in the UK pension sectors,” Jaegemann added.
The first auction deadlines will be set for the end of June.