Illiquidity is causing many problems for the private equity industry. On the front line, it means private equity firms are unable to raise the debt they need to structure the leveraged buyouts that have driven the growth of the industry for the past decade. Behind the scenes, many investors that have supported the growth of the asset class find themselves unable to meet future commitments because distributions have all but dried up and, in some cases, needing to scale back their private equity operations.

Jeremy Coller, founder and chief executive of Coller Capital, has predicted 30-50% of private equity firms could go out of business in the coming years. Limited partners, meanwhile, are finding it difficult to meet capital calls and are looking to sell positions.

Secondaries investors, who buy positions in private equity funds from limited partners, believe they have a solution, at least in some situations. The secondary market has grown dramatically over the past decade...

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