Secondaries, or secondary transactions, involve the buying and selling of pre-existing investor commitments to private equity and other private market funds. Unlike primary fund commitments made during initial fundraising, secondary transactions occur after the fund has been established and investments have been made.
The secondary market has grown exponentially, from under $10 billion in annual volume in 2005 to over $130 billion in 2024. This growth has been driven by institutional investors' need for portfolio rebalancing, regulatory changes, and the increasing acceptance of secondaries as a legitimate liquidity tool rather than a sign of distress.
There are two primary types of secondary transactions. LP-led secondaries involve a limited partner selling their fund interest to a secondary buyer, typically at a discount to net asset value (NAV). GP-led secondaries, also known as continuation vehicles, involve the GP restructuring a fund to provide liquidity to existing LPs while retaining high-performing assets in a new vehicle.
Pricing in the secondary market is expressed as a percentage of NAV. Historically, LP interests traded at discounts of 10-30%, though high-quality assets have traded at par or even premiums in recent years. GP-led continuation vehicles typically price at or near NAV, though the effective economics depend on the terms of the new vehicle.
The secondary market serves several critical functions in the private markets ecosystem. For LPs, it provides liquidity in an otherwise illiquid asset class. For GPs, continuation vehicles allow them to hold winning investments longer while providing optionality for their LP base. For secondary buyers, the shortened J-curve and reduced blind pool risk create an attractive risk-return profile.
Key players in the secondaries market include Ardian, Lexington Partners (now part of Franklin Templeton), Coller Capital, HarbourVest, and Blackstone Strategic Partners. Our platform tracks secondary fund performance, GP-led continuation vehicle launches, and the growing universe of dedicated secondaries managers.