GOLDMAN SACHS has raised $5.5 billion (€4.17 billion) for a fund to buy discounted private equity holdings – the largest amount ever raised for a fund of this type – as investors anticipate a flood of forced sellers trying to offload private equity stakes.

Goldman’s Vintage V fund last week closed to new investors after 10 months of fundraising, having surpassed its goal of $5 billion. The fund is a so-called secondary fund, which buys investors’ holdings in private equity and buy-out funds.

The successful fundraising reinforces the view that the private equity secondary market is where most deals are expected to happen in the next year as investors try to raise cash.

JPMorgan Chase is also raising a secondary fund and is believed to have attracted $500 million over the past few months.

Banks, which account for about 25 per cent of private equity investors, are expected to be big sellers of their holdings as they seek to raise capital.

Investors who buy into private equity funds cannot redeem their investments. A sale to another investor or secondary fund is the main way out.

Until recently, they often sold at a premium. However, the holdings have in recent months been changing hands at record discounts of more than 50 per cent of the original value.

– (Copyright The Financial Times Limited 2009)