If an avalanche blocks the road, pave a path around it. That's the idea behind a series of new illiquid-asset trading markets designed and operated by SecondMarket Inc.
By building new avenues to trade various kinds of assets whose traditional venues seized up, SecondMarket actually is gaining business from the financial crisis. The four-year old New York-based firm has doubled its workforce to 100 in the last 12 months, and shows no sign of slowing down. It's currently looking to add 14 heads, including a general counsel, a CDO market director, and several technology roles.
"We saw a real acceleration in business in 2008, and this year has started equally as strong," says Chief Executive Barry Silbert. "As we identify new markets to enter, we put together teams of four to eight people pretty quickly."
Outlets to Trade MBS and CDOs to Launch Soon
In February, SecondMarket launched an online platform or secondary market for investors to trade "limited partnership interests" - stakes in hedge funds and private equity funds. Some 200 new institutions registered in the week of the launch, raising the number of buyers and sellers able to use SecondMarket's asset trading platforms to 2,500.
Three more are set to launch in coming weeks: mortgage-backed securities, collateralized debt obligations and privately held companies. These new markets will follow the template set by SecondMarket's earlier systems for trading auction-rate securities, bankruptcy claims, and various classes of restricted stock in public companies. The latter was where the firm, originally called Restricted Stock Partners, got its start.
More than 300 prospective buyers of MBS and CDOs are set to use the new systems, Silbert says. He also expects strong interest in trading private company ownership stakes, because the main alternative, the initial public offering market, is all but dead. As a result, "The backlog of private companies that would go public is very long," he observes. (Private equity buyouts have become scarce, too.)
Whether in investments whose traditional secondary market stalled, or those that lacked one to begin with, SecondMarket has ambitious plans. The company is keeping tabs on another 50 asset classes it might enter somewhere down the line.