Funds (mutual, hedge and others) registered under the 1940 Investment Companies Act are allowed a maximum of 15% of their portfolios in illiquid securities (defined as instruments that take longer than a single day to liquidate in the public markets) by regulation. With the rapid fall in the major stock exchanges, many funds are offside and need to liquidate their illiquid holdings in a very rapid manner to stay in compliance with the regulations. The problem has been compounded by investor redemptions stripping cash out of the funds. In addition, many investors need liquidity to meet margin requirements and/or want to liquidate all or portions of their portfolio.
This has created a unique situation where highly distressed sellers need to sell their private share positions quickly in a private market which is highly inefficient and illiquid. This was similar to the private oil and gas companies which were sold by institutions in the 2008/2009 crises at discounts up to 90% only to be resold by investors one year later for 50-200+% gains.