Illiquid Alternative Investments Secondary Market

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MrGreek16
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Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

I’m trying to find specific illiquid alternative investments products or funds that are illiquid and need a secondary market to bring liquidity to the market especially for retail investors. Been searching for illiquid products with little or no redemptions available.

Does anyone have any suggestions. These products would have to have been sold to retail investors sikilar to non traded REITs which over time up until recently had little to no redemption thus a smaller secondary market was formed.

Also curious if anyone knows of any illiquid alternative investment products besides non traded reits that have a smaller secondary market that provides liquidity to investors.
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David Jay
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Re: Illiquid Alternative Investments Secondary Market

Post by David Jay »

It's probably best just to "bump" this thread (by posting a reply) rather than creating a duplicate thread...
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

David Jay wrote: Fri Aug 20, 2021 6:32 pm It's probably best just to "bump" this thread (by posting a reply) rather than creating a duplicate thread...
Thank you. I was honestly looking for it to bump and couldn’t find it in the topics
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MrGreek16
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

BUMP!

If anyone can help me would appreciate it greatly!

What are some investment products (securities, private placements, etc) that have have a liquidity problem for retail investors.

Non traded REITs were one where retail investors had a difficult time of liquidating out of their investments and usually at a deep discount to NAV.

Are there any other products that are like this in today’s market please let me know if anything comes to mind.
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Re: Illiquid Alternative Investments Secondary Market

Post by nisiprius »

The Stone Ridge interval funds? Other interval funds?
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MrGreek16
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

nisiprius wrote: Fri Aug 20, 2021 8:17 pm The Stone Ridge interval funds? Other interval funds?
Yeah I thought this as well. Looked into interval funds. While “illiquid” the funds offer redemptions which defeats the viability of a secondary market forming since the funds buy back redemptions shares usually quarterly.

Looking for investment products that have suspended or do not have redemptions this making them illiquid with no market for the securities to be sold. Especially products that have been sold and promoted to retail investors.
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Re: Illiquid Alternative Investments Secondary Market

Post by NateMcHaffie »

I'm completely speculating, but I'm intrigued by the question and had two thoughts:

1. Residential real estate options. I know nothing of commerical real estate options but I recently learned that contract for deed sales (adjacent to but distinct from rent to own) may involve residential real estate options in the US. I can't imagine a secondary market exists.

2. Home equity risk. Economist William Fischel proposed a hypothetical product he called "home equity insurance." Elsewhere on the board, futures on the Case Shiller index have been discussed as a means of hedging home equity risk but I'm not sure those futures still trade, that product never seemed to reach critical mass. I'm unaware of an accessible way to hedge or diversify the idiosyncratic risk of home ownership while owning and living in a single family home.

Hope these spark off an idea for you if nothing else.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

NateMcHaffie wrote: Fri Aug 20, 2021 11:26 pm I'm completely speculating, but I'm intrigued by the question and had two thoughts:

1. Residential real estate options. I know nothing of commerical real estate options but I recently learned that contract for deed sales (adjacent to but distinct from rent to own) may involve residential real estate options in the US. I can't imagine a secondary market exists.

2. Home equity risk. Economist William Fischel proposed a hypothetical product he called "home equity insurance." Elsewhere on the board, futures on the Case Shiller index have been discussed as a means of hedging home equity risk but I'm not sure those futures still trade, that product never seemed to reach critical mass. I'm unaware of an accessible way to hedge or diversify the idiosyncratic risk of home ownership while owning and living in a single family home.

Hope these spark off an idea for you if nothing else.
First option actually sounds interesting after researching quickly. Not sure how these would work as a secondary market since they seem to be between the seller of the deed and the buyer of the deed “contract” that then gets paid till fulfilled.

More interested in securities as they are products that are more widely sold and they’d need to be transferable to make for a smoother secondary market to be constructed.
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Re: Illiquid Alternative Investments Secondary Market

Post by Wade Garrett »

MrGreek16 wrote: Fri Aug 20, 2021 9:33 pm Especially products that have been sold and promoted to retail investors.
I'm generally not a fan of investment products that are sold/promoted to retail investors mainly due to high fees, tax inefficiencies, etc. Those products are out there. Whether or not they're illiquid enough for you I can't say. But either way those products don't interest me.

Direct real estate, private equity, etc. investing is more interesting to me. But with that you're getting away from being a passive investor and closer to having a side job.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

Wade Garrett wrote: Sat Aug 21, 2021 9:49 am
MrGreek16 wrote: Fri Aug 20, 2021 9:33 pm Especially products that have been sold and promoted to retail investors.
I'm generally not a fan of investment products that are sold/promoted to retail investors mainly due to high fees, tax inefficiencies, etc. Those products are out there. Whether or not they're illiquid enough for you I can't say. But either way those products don't interest me.

Direct real estate, private equity, etc. investing is more interesting to me. But with that you're getting away from being a passive investor and closer to having a side job.
Yes exactly. I am looking for the products exactly like you described. Something where retail investors became stuck with no way to liquidate. Something that would need a secondary market to develop. This would not be for my own personal investment.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

Bump. Any info is greatly appreciated!
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Re: Illiquid Alternative Investments Secondary Market

Post by Oregano »

This is (almost) your lucky day! Approximately 2,800 OTC securities are in the process of having active quotes removed and while some will end up trading on the gray market, some of them may never trade in the public markets again.

See https://www.securitieslawyer101.com/202 ... pproaches/

Alas, I say almost because what would you really be able to do here or in most other illliquid investments you might be interested in? You would first need to research the investments in detail to determine what they're worth, then somehow get in touch with a list of investors (I think that will be very challenging), then hope you can convince a considerable number of them to sell to you at a fraction of value?

I wish you great luck!
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MrGreek16
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

Oregano wrote: Fri Aug 27, 2021 10:07 pm This is (almost) your lucky day! Approximately 2,800 OTC securities are in the process of having active quotes removed and while some will end up trading on the gray market, some of them may never trade in the public markets again.

See https://www.securitieslawyer101.com/202 ... pproaches/

Alas, I say almost because what would you really be able to do here or in most other illliquid investments you might be interested in? You would first need to research the investments in detail to determine what they're worth, then somehow get in touch with a list of investors (I think that will be very challenging), then hope you can convince a considerable number of them to sell to you at a fraction of value?

I wish you great luck!
Real question here is if there even is any market interest for these securities. Seems like these securities are being delisted for being either inactive, suspended, or having a complete lack of information. Would be tough to make any market in these since traded would probably be very sparse and almost pointless to make any effort to trade them.
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Re: Illiquid Alternative Investments Secondary Market

Post by Elric »

MrGreek16 wrote: Fri Jul 30, 2021 3:10 am I’m trying to find specific illiquid alternative investments products or funds that are illiquid and need a secondary market to bring liquidity to the market especially for retail investors. Been searching for illiquid products with little or no redemptions available.

Does anyone have any suggestions. These products would have to have been sold to retail investors sikilar to non traded REITs which over time up until recently had little to no redemption thus a smaller secondary market was formed.

Also curious if anyone knows of any illiquid alternative investment products besides non traded reits that have a smaller secondary market that provides liquidity to investors.
What about structures notes, offered by many? They are illiquid. Also, while many non-traded BDC's have quarterly redemptions, these may be routinely way over-subscribed, limiting liquidity.

I seem to recall their are places to list or look up offers to buy shares in such, at a major discount to Net Asset Value, but I don't recall where.

Why are you looking to identify them?
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Re: Illiquid Alternative Investments Secondary Market

Post by Oregano »

Most of them probably are garbage, but some do have publicly available information but are being thrown out with the bathwater. There are a number of currently paying preferred stocks and bonds in the mix, many of them investment grade. So in theory you could buy them cheap and hold on, but I ask again, how will you find the sellers? That's literally what public markets are built for!
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

Elric wrote: Fri Aug 27, 2021 10:35 pm
MrGreek16 wrote: Fri Jul 30, 2021 3:10 am I’m trying to find specific illiquid alternative investments products or funds that are illiquid and need a secondary market to bring liquidity to the market especially for retail investors. Been searching for illiquid products with little or no redemptions available.

Does anyone have any suggestions. These products would have to have been sold to retail investors sikilar to non traded REITs which over time up until recently had little to no redemption thus a smaller secondary market was formed.

Also curious if anyone knows of any illiquid alternative investment products besides non traded reits that have a smaller secondary market that provides liquidity to investors.
What about structures notes, offered by many? They are illiquid. Also, while many non-traded BDC's have quarterly redemptions, these may be routinely way over-subscribed, limiting liquidity.

I seem to recall their are places to list or look up offers to buy shares in such, at a major discount to Net Asset Value, but I don't recall where.

Why are you looking to identify them?
Yeah I know the whole non traded reit / BDC market very well.

Redemptions are an issue since they offer at part a form of liquidity for shareholders. This is where non traded reits differed as they were allowed (and usually did) suspend their dividends leaving investors stuck holding these products with no way to liquidate their shares.

Looking to find a market that is illiquid and can use a liquidity provider to help shareholders liquidate their holdings that they had issues liquidating in the past.

I will look into structured notes. I have not looked into this yet.
Last edited by MrGreek16 on Fri Aug 27, 2021 10:52 pm, edited 1 time in total.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

Oregano wrote: Fri Aug 27, 2021 10:37 pm Most of them probably are garbage, but some do have publicly available information but are being thrown out with the bathwater. There are a number of currently paying preferred stocks and bonds in the mix, many of them investment grade. So in theory you could buy them cheap and hold on, but I ask again, how will you find the sellers? That's literally what public markets are built for!
I’m looking more for a broker/liquidity provider idea rather then an investment idea. Sellers would need to make an effort to sell their shares as would have to be unsolicitated transactions
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Re: Illiquid Alternative Investments Secondary Market

Post by 123 »

I think most of these alternative investments are illiquid because they are sold and not bought. Meaning that there is usually a hefty sales commission paid by the sponsor to the financial advisers that sell the products. They become the "timeshares" of the securities markets. They are illiquid because holders are generally not able to sell without the assistance of a reseller and they are usually not attractive on an individual basis for financial adviser to try to resell since they make more commission on the flashier "latest and greatest" cooked up by investment sponsors. Holders are not willing to recognize the discount they have to take to sell the investment and consequently the investments sit.

If someone wants to unload such an investment and the sponsor/custodian does not offer a buy-back one option might be to place a small advertisement in the Wall Street Journal (even a regional ad). There's a good chance someone may be willing to buy it, but perhaps at a discount that might seem untenable.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

123 wrote: Fri Aug 27, 2021 11:11 pm I think most of these alternative investments are illiquid because they are sold and not bought. Meaning that there is usually a hefty sales commission paid by the sponsor to the financial advisers that sell the products. They become the "timeshares" of the securities markets. They are illiquid because holders are generally not able to sell without the assistance of a reseller and they are usually not attractive on an individual basis for financial adviser to try to resell since they make more commission on the flashier "latest and greatest" cooked up by investment sponsors. Holders are not willing to recognize the discount they have to take to sell the investment and consequently the investments sit.

If someone wants to unload such an investment and the sponsor/custodian does not offer a buy-back one option might be to place a small advertisement in the Wall Street Journal (even a regional ad). There's a good chance someone may be willing to buy it, but perhaps at a discount that might seem untenable.
You’re absolutely right.

Yeah a lot of times people do not realize that the discount to sell is really the market price and they were misled by sponsors and their advisors who sold them the products in the first place.

What types of illiquid products do you see could have a secondary market probability for people to be able to liquidate whom these scenarios happened too. This is what happened in the non traded reit world and BDC.

Any other products come to mind besides those two that I just mentioned?
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Re: Illiquid Alternative Investments Secondary Market

Post by 123 »

I think the general category of "Church Bonds" is often illiquid, particularly those that are sold as private placements. They are sold related to religious/faith and purchasers can often have the attitude that if the bonds are not paid back the amount they may lose benefits the church so its okay with them. They are sold to individuals based on the appeal of a higher interest rate than CDs yet many of their purchasers would never consider the purchase of any regular bonds or stocks.

Edited to add:
Israel Bonds https://israelbondsintl.com/ would likely also fall into category of investments that will lack a secondary market.
Last edited by 123 on Sat Aug 28, 2021 12:12 am, edited 1 time in total.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

123 wrote: Sat Aug 28, 2021 12:01 am I think the general category of "Church Bonds" is often illiquid, particularly those that are sold as private placements. They are sold related to religious/faith and purchasers can often have the attitude that if the bonds are not paid back the amount they may lose benefits the church so its okay with them. They are sold to individuals based on the appeal of a higher interest rate than CDs yet many of their purchasers would never consider the purchase of any regular bonds or stocks.
Yeah I actually thought about this.
Is there a secondary market for this? I’ve tried to research if there is a market for people to liquidate them but fell short as there really is little information on them other then what they are. Would be interesting if a market could be made to help these investors sell their bonds to other investors willing to take on the debt. But as of yet I have yet to find any information on if people have liquidated them in the past to the effect where a business could be made of facilitating trades for these.
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Re: Illiquid Alternative Investments Secondary Market

Post by 123 »

I don't think there is much potential in developing a business for supporting a secondary market in church bonds. The problems are that the individual issues are comparatively small and doing reasonable due diligence to establish creditworthiness on an on-going basis is virtually impossible due to the expenses involved. Any assets that may serve as collateral for the bonds, such as church buildings, have limited marketability even if foreclosure was undertaken on defaults.
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

123 wrote: Sat Aug 28, 2021 12:29 am I don't think there is much potential in developing a business for supporting a secondary market in church bonds. The problems are that the individual issues are comparatively small and doing reasonable due diligence to establish creditworthiness on an on-going basis is virtually impossible due to the expenses involved. Any assets that may serve as collateral for the bonds, such as church buildings, have limited marketability even if foreclosure was undertaken on defaults.
Yeah I agree with you. If another illiquid investment product comes to mind that a secondary market can develop for please let me know. Something where shareholders (retail investors in particular) can use a liquidity provider in order to liquidate non traded illiquid investments.
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Re: Illiquid Alternative Investments Secondary Market

Post by ncbill »

MrGreek16 wrote: Fri Jul 30, 2021 3:10 am I’m trying to find specific illiquid alternative investments products or funds that are illiquid and need a secondary market to bring liquidity to the market especially for retail investors. Been searching for illiquid products with little or no redemptions available.

Does anyone have any suggestions. These products would have to have been sold to retail investors sikilar to non traded REITs which over time up until recently had little to no redemption thus a smaller secondary market was formed.

Also curious if anyone knows of any illiquid alternative investment products besides non traded reits that have a smaller secondary market that provides liquidity to investors.
Central Trade & Transfer is the auction site I used to get rid of mine...you can also buy them there: https://www.cttauctions.com
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Re: Illiquid Alternative Investments Secondary Market

Post by MrGreek16 »

ncbill wrote: Sat Aug 28, 2021 10:26 am
MrGreek16 wrote: Fri Jul 30, 2021 3:10 am I’m trying to find specific illiquid alternative investments products or funds that are illiquid and need a secondary market to bring liquidity to the market especially for retail investors. Been searching for illiquid products with little or no redemptions available.

Does anyone have any suggestions. These products would have to have been sold to retail investors sikilar to non traded REITs which over time up until recently had little to no redemption thus a smaller secondary market was formed.

Also curious if anyone knows of any illiquid alternative investment products besides non traded reits that have a smaller secondary market that provides liquidity to investors.
Central Trade & Transfer is the auction site I used to get rid of mine...you can also buy them there: https://www.cttauctions.com

Not looking to sell. Looking for investments that are similar but not the same to those that central trade and transfer buys as they are products that need a secondary market.
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