It seems that private equity fund sales are heating up so much they need their own market.

SecondMarket said today it is opening trading in limited partnership interests in private equity funds, venture capital funds, hedge funds and fund of funds (the intention to launch into this market was reported a few weeks ago by our sister publication peHUB).

The firm also hired Jeffrey Bollerman, previously at Citigroup Wealth Management, to help lead its LP interest market.

The intensifying pace of activity in the secondary market has been well documented, although its a skewed market with one insider reporting five times as many sellers than buyers.

SecondMarket CEO Barry Silbert told Reuters that the firm has already listed about $500 million worth of limited partnership interests in funds for sale. ”You have seen a lot of the funds have some poor performance and for investors, there are sellers who need to get out, and there are actually buyers who want to get in,” Silbert said. 
Silbert said he believes such trading of partnership interests could reduce some of the risks to the hedge fund industry from a surge in redemption requests. 

After this recent economic turmoil, “our view is that the hedge fund business is going to have to develop,” Silbert said.  ”(Trading of partnership interests) will reduce the withdrawal and redemption risk in the hedge fund business, and reduce the risk that private equity funds face in investors being unable to fulfill their capital call obligations.” 

Silbert said trading could also increase transparency in the hedge fund business, as investors would remember in the future if their partnership interest was tough to sell, or was trading at a steep discount.  

Under SecondMarket’s trading mechanism, funds will be able to limit who participates in trading to whoever they want, from a strict group of existing limited partners, to a wider group of investors, or the general public, Silbert said.  

SecondMarket charges a fee equal to a percentage of the consummated sale to both sellers and buyers.