NYPPEX’s Private Equity and Debt Total Return Swaps enable qualified investors to receive the returns of either a private equity index, portfolio or a specific private fund for a period of time by paying an upfront cash payment or a quarterly floating rate payment linked to an index.

For swaps involving portfolios and specific funds, future capital call obligations may also be assumed by the receiver of private equity returns (the “Payee”) from the payor of private equity returns (the “Payor”).

Qualified parties may enter bid and offer indications for desired swap structures. NYPPEX presents total return swap opportunities to qualified parties, negotiates price and terms, creates documents, and settles the transaction.

The advantages of NYPPEX’s Private Equity and Debt Total Return Swaps include:

	Transaction Size. Supply of secondary private equity investment opportunities is easily created in size and with specific risk/return characteristics.(e.g. vintage year, sector such as ‘mid-cap buyouts’ etc.).
	Execution Speed. Swaps can be executed immediately enabling portfolio managers to quickly adjust private equity exposure, since swaps represent the economic returns and not the legal transfer of the underlying securities (e.g. for swaps on specific private funds, the general partner’s approval is not required).
	Protect GP Relationships. Limited partners can now adjust private equity exposures without disturbing their long-term relationships with funds’ general partners, as the cash flows generated by underlying interests are swapped, not the legal ownership of the funds’ interests.
	Target Allocations. Limited partners can now make allocations to specific areas of the alternative asset class such as by i) sector (e.g. seed venture), region (e.g. European large buyout), vintage (e.g. 2004 vintage buyout funds) etc.
	Pricing Efficiencies. For swap payors (the payor of private equity returns), swap transactions may occur at prices representing lower discounts to net asset value vs. comparable “cash” secondary private equity transactions.
	Ability to Hedge. Swaps enable portfolio managers to hedge specific areas of risk in their alternative asset portfolio (e.g. if seeking to reduce portfolio weight of ‘2000 vintage venture funds’, enter a sell order to NYPPEX to ‘pay the returns of 2000 vintage funds’).
	Ability to Leverage. Portfolio managers can add leverage and acquire additional private equity exposure as a payee (receiver) of private equity returns which may result in generating incremental IRRs.
	Low Transaction Cost. Swaps typically offer the lowest transaction cost alternative as compared to both secondary private equity transactions and primary capital commitments.

Prospective payors of private equity returns include holders of private equity investments such as

	public and private pension funds, corporations, financial institutions, insurance companies, endowments and foundations
	private clients, and their respective advisors and brokers worldwide

Motivations to be a payor of private equity returns include to

	achieve targeted portfolio allocations
	generate or conserve cash (e.g. eliminate future capital calls) without incurring sales
	hedge or eliminate underperforming funds and increase IRR
	rebalance portfolios by sector, style, vintage year, region, etc. (e.g. sell 2000 venture fund returns vs. buy 1995 mid buyout fund returns)
	improve management efficiently by paying the returns of small holdings to a counter-party (in exchange for some form of cash payment), and in effect, eliminate the small holding

Eligible U.S. and non U.S. private partnerships for swap transactions at NYPPEX include venture, private equity, buyout, hedge (hedge funds), mezzanine, debt, secondary private equity, distressed, energy, natural resources, currencies etc. Legal structures include limited partnerships, limited liability companies, funds of funds, trusts, offshore etc. Eligible U.S. and non U.S. private companies include those suitable for venture, private equity, buyout or debt private fund portfolios. Financial profiles can range from distressed to pre-IPO.

Swaps require a $5,000,000 minimum notional principal amount and are categorized as:

	Single Interest Swaps – A swap whose private equity returns are based on a single interest in a private partnership or company.
	Portfolio Swaps – A swap whose private equity returns are based on interests in multiple private partnerships or companies.
	Index Swaps – A swap whose private equity returns are based on an agreed upon index such as the Venture Economics Index for US Venture Returns.