While this may sound pretty straight-forward, fund secondaries are fairly complex. One complexity relates to the fact that an investment in a private equity fund is "illiquid." It is called illiquid because it isn’t very easy for an investor in a private equity fund to sell its fund interest.
There are several reasons why interests in private equity funds are illiquid. First, unlike publicly-traded stocks which can be bought and sold very easily on public markets like the New York Stock Exchange and NASDAQ, there is no public market where one can buy or sell interests in private equity funds. Second, for stocks to be able to be sold on public markets like the New York Stock Exchange and NASDAQ, by law they must first be registered with the US Securities and Exchange Commission (“SEC”). Interests in private equity funds are not registered with the SEC, and so there are legal (statutory) restrictions on the sale or transfer of these fund interests. Third, investors in private equity funds sign contracts (known as “limited partnership agreements” or “LPAs”) which contain restrictions on the sale or transfer of the fund interests.