Private Markets Secondaries: Drivers of Growth and Future Outlook

Secondary markets in private equity and other private assets have transformed from a niche mechanism for distressed sellers into an essential tool for capital formation and portfolio management. In 2024 secondary transaction volume reached a record $162 bn globally, surpassing the previous peak in 2021. LP‑led transactions — where limited partners (LPs) sell stakes in mature funds — accounted for roughly 54 % of the market (about $87 bn) in 2024, while GP‑led transactions — initiated by general partners (GPs) to recapitalize or extend ownership of assets — comprised about 48 % of total volume. Pricing in 2024 was resilient: buyout portfolios traded at roughly 94 % of net asset value (NAV), credit portfolios at 91 %, and venture/growth portfolios at 75 %.

Secondary markets have been propelled by both structural forces and cyclical pressures. Liquidity needs and denominator effects have driven institutions to rebalance holdings; slower realization cycles and constrained exits have left capital trapped in funds; and the maturation of private markets has created a large inventory of seasoned assets ripe for trading. Meanwhile, innovations such as GP‑led continuation vehicles and evergreen retail‑oriented vehicles have expanded the toolbox for both sellers and buyers. Regulatory and accounting developments — including the proliferation of ’40‑Act and UCITS vehicles — have also facilitated participation by a broader investor base.

For asset managers, wealth managers and financial advisors, these developments present opportunities and challenges. Secondary investments can accelerate cash‑return profiles, smooth portfolio pacing and allow re‑sizing of overallocated programs. At the same time, information asymmetry, pricing dispersion and governance complexity demand careful manager selection and due diligence. Going forward, market participants should expect continued growth, further expansion into private credit, infrastructure and real assets, greater participation from retail and defined‑contribution platforms, and increasing standardization of data and pricing.

Key Takeaways

• Structural versus cyclical drivers: The growth of secondary markets is underpinned by structural factors such as the scale of private capital pools and innovations in transaction structures. Cyclical stresses — such as exit droughts and denominator effects — have amplified activity but are not the sole cause.
• LP‑led and GP‑led transactions: LP‑led sales remain the largest segment, offering portfolio‑level diversification to buyers and liquidity to sellers. GP‑led transactions, including single‑asset continuation vehicles and strip sales, are growing rapidly and accounted for nearly half of volume in 2024.
• Market sophistication and pricing: The market now encompasses buyout, growth, venture, infrastructure, private credit and real estate assets. Pricing dispersion reflects asset quality, sector mix and macro conditions; buyout portfolios priced near par (94 % of NAV) in 2024, whereas venture and growth portfolios traded at steeper discounts.
• Implications for allocators and advisors: Secondaries can mitigate J‑curve effects, enhance vintage diversification and provide liquidity, but they introduce risks related to information asymmetry, manager selection and concentration. Advisors should prepare clients for illiquidity, valuation variability and complex structures.
• Future outlook: Continued innovation, expansion into new asset classes and increased retail access are likely. However, market cycles and regulatory changes will influence volume and pricing. Investment committees should re‑evaluate their alternatives program and develop frameworks for strategic secondaries allocations.

Section 1 – The Evolution of Secondaries: From Niche to Mainstream

1.1 A Brief History of Secondary Markets

Secondary transactions in private equity emerged in the 1990s as a way for LPs to exit positions before the end of a fund’s life. Early activity was small and opportunistic, often involving distressed sellers needing liquidity. Over the past two decades, private markets have grown dramatically. Private equity assets under management (AUM) increased from roughly $600 bn in the early 2000s to over $8 trn by the mid‑2020s (estimates from industry associations and Preqin). As AUM expanded, so did the size and complexity of secondary markets. By 2014 annual secondary deal volume was around $50 bn. A decade later, in 2024, secondary volume exceeded $160 bn, more than tripling in size.

Initially dominated by buyout funds, secondary markets have diversified. Growth equity, venture capital, infrastructure, private credit and real estate strategies now feature prominently in secondary transactions. Infrastructure secondaries appeal to investors seeking inflation‑linked cash flows. Private credit secondaries allow buyers to access seasoned loan portfolios with floating rates and attractive yields. Real estate secondaries provide stable income and inflation protection; private commercial real estate has historically generated price appreciation of 3.4 % annually from 2005‑2024, exceeding average inflation of 2.6 %.

1.2 Scaling in Volume and Sophistication

The scale of transactions has increased both in size and number. BlackRock reported that closed secondary transaction volume in 2024 reached $162 bn globally, surpassing the previous record of $132 bn in 2021. LP‑led deals totaled about $87 bn, while GP‑led deals amounted to $75 bn. Lazard’s secondary report estimated $152 bn of secondary volume in 2024 and projected $175 bn for 2025. The first half of 2025 alone saw more than $100 bn in completed or announced deals, highlighting continued momentum.

Transaction structures have become more sophisticated. Traditional LP‑led portfolios involve the sale of diversified fund interests across vintages. GP‑led transactions include continuation vehicles (single‑asset or multi‑asset) that allow managers to extend ownership of prized assets while providing liquidity to existing investors. Strip sales, tender offers and preferred equity solutions provide additional flexibility. Pricing mechanisms have evolved from simple discount‑to‑NAV approaches to more nuanced negotiations based on asset quality, sector outlook and future value creation. In 2024, buyout portfolios traded at a mean price of 94 % of NAV, private credit portfolios at 91 %, and venture/growth portfolios at 75 %, reflecting variations in risk and sentiment.

1.3 From Distressed Tool to Portfolio Management Mechanism

Historically, secondaries were viewed as a mechanism for distressed or liquidity‑constrained investors. Today they are recognized as a proactive portfolio management tool. LPs use secondaries to rebalance vintage exposure, reduce over‑allocations, mitigate denominator effects (where the decline in public markets inflates the relative weight of private holdings) and free up capital for new commitments. For GPs, secondary transactions provide a way to crystallize value, extend asset holding periods to maximize returns and align investor liquidity with asset maturity. The maturation of private markets — with more funds, vintages and investors — has naturally increased the supply of interests available for trading. At the same time, buyers have become more sophisticated and are able to underwrite complex assets across multiple sectors and geographies.

Section 2 – Key Drivers Behind Continued Growth

The surge in secondary market activity is driven by a confluence of structural and cyclical forces. Understanding these drivers is critical for evaluating future growth and investment opportunities.

2.1 Liquidity Needs and Denominator Effects

The denominator effect occurs when a fall in public‑market valuations increases the relative weight of private assets in a portfolio, triggering automatic rebalancing requirements. During public‑market downturns, such as in 2022–23, many institutions found themselves over‑allocated to private equity relative to policy targets. To rebalance portfolios without selling public holdings at depressed prices, institutions turned to secondaries as a source of liquidity. Similarly, wealth platforms serving high‑net‑worth clients often face redemption requests or the need to rebalance across generations. Secondaries provide a way to generate liquidity while maintaining access to private markets.

2.2 Slower Realization Cycles and Constrained Exit Routes

Traditional exit routes — initial public offerings (IPOs), trade sales and sponsor‑to‑sponsor deals — have slowed due to macro uncertainty, higher borrowing costs and regulatory scrutiny. In 2023–2024, global IPO activity fell to multi‑year lows and leveraged buyout exits were delayed. This exit drought extended fund holding periods and delayed distributions to LPs. Secondaries allowed LPs to monetise positions without waiting for realizations. On the GP side, continuation vehicles offered an alternative to forced sales, enabling managers to retain ownership of high‑quality assets while providing optional liquidity.

2.3 Maturing Private Markets

As private markets have grown, the universe of funded vintages, sectors and geographies has expanded. More than 3,000 private equity funds were raised globally between 2020 and 2024 (industry data), with significant diversification across buyout, growth, venture, infrastructure and credit strategies. This maturation has increased the supply of seasoned assets suitable for secondary transactions. LPs are no longer forced sellers; many view secondaries as an active tool to optimize portfolio construction by trimming exposures to over‑represented vintages, geographies or sectors. Meanwhile, buyers benefit from greater selection and the ability to craft bespoke portfolios.

2.4 Shift to GP‑Led Transactions

GP‑led deals have evolved from occasional fund restructurings to a mainstream component of secondaries. In 2024 GP‑led transactions accounted for nearly 48 % of secondary volume. Single‑asset continuation vehicles comprised about 48 % of that GP‑led volume. Managers use continuation vehicles to retain stakes in trophy assets where the growth potential remains strong, but the fund’s life is nearing maturity. Multi‑asset continuation vehicles and strip sales allow re‑aggregation of several companies into a new vehicle, providing diversification for buyers and optional liquidity for sellers. This structural innovation has broadened the appeal of secondaries beyond distressed sales, offering GPs a way to maximize value and align incentives.

2.5 Growth of Evergreen and Retail‑Oriented Vehicles

The rise of evergreen funds and retail‑focused private market vehicles has created additional demand for secondary exposure. Daily or periodic liquidity features offered by ’40‑Act funds, UCITS and ELTIF structures require managers to maintain cash buffers or access secondary markets to manage inflows and outflows. As a result, secondary investments are used to balance liquidity within these vehicles. Retail investors, through feeder funds or interval funds, are gaining exposure to private assets, increasing the potential buyer universe and providing sellers with new exit options.

2.6 Regulatory, Accounting and Capital Considerations

Changes in regulatory and accounting standards have influenced secondary market activity. Solvency regimes for insurers, risk‑based capital requirements for banks and stress‑testing guidelines can prompt institutions to adjust private market exposures. Fair‑value accounting standards require LPs to mark holdings to market, increasing transparency and facilitating price discovery. At the same time, the adoption of ILPA guidelines and increased disclosure in GP‑led deals have improved governance and reduced reputational risk, encouraging more participants.

Section 3 – Market Segments: LP‑Led vs GP‑Led and Beyond

3.1 LP‑Led Transactions

LP‑led transactions involve the sale of fund interests by limited partners. These deals typically comprise diversified portfolios across vintages and managers. Buyers underwrite the underlying funds, assessing performance history, remaining duration and sector exposure. LP‑led transactions appeal to investors seeking broad diversification, immediate deployment and accelerated cash flows relative to primary commitments. The volume of LP‑led deals reached approximately $87 bn in 2024 and accounted for about 54 % of total secondary activity. Pricing for LP‑led buyout portfolios averaged 94 % of NAV in 2024. Venture and growth portfolios priced around 75 % of NAV due to higher uncertainty. Discounts tend to widen during periods of market stress and narrow when public markets recover.

3.2 GP‑Led Transactions

GP‑led transactions are initiated by the general partner and often involve recapitalizing a single asset or a pool of assets. Investors in the original fund are offered the option to sell their interests or roll into a new vehicle. These deals allow GPs to realize partial liquidity while maintaining control of high‑potential assets. GP‑led volume was approximately $72–75 bn in 2024. Single‑asset continuation vehicles made up almost half of the GP‑led market, reflecting investor appetite for concentrated positions in high‑quality companies. Pricing varies widely depending on asset quality; roughly 56 % of single‑asset deals priced at or above par in 2024.

3.3 Other Segments: Infrastructure, Private Credit, Real Estate and Venture

Infrastructure: Secondary transactions in infrastructure funds offer investors inflation‑linked cash flows and long‑term contractual revenues. Private infrastructure assets typically have pricing mechanisms tied to inflation and strong competitive positions that allow cost pass‑through. As Brookfield notes, infrastructure has historically performed well during periods of above‑average inflation because contracts often include inflation escalators.

Private credit: Secondary sales of direct lending funds or loan portfolios provide buyers with floating‑rate exposure and attractive yields. Direct lending has delivered an annualized gross return of 9.46 % since 2004, with performance reaching 11.5 % during high‑interest‑rate environments. This return profile, coupled with floating‑rate structures that benefit from rising rates, makes private credit secondaries attractive in periods of monetary tightening. Pricing dynamics are influenced by credit quality and leverage; high‑quality portfolios may trade closer to par, while stressed portfolios trade at deeper discounts.

Real estate: Secondary markets for private real estate funds and properties offer stable income and inflation protection. Private commercial real estate displays near‑zero correlation with public equities and has historically delivered price appreciation of 3.4 % annually from 2005‑2024, exceeding inflation of 2.6 %. Income yields have averaged 4.1 % from 2015‑2024, providing steady cash flows. However, valuations can be sensitive to interest rates and economic growth, leading to pricing dispersion across sectors such as office, industrial and logistics.

Venture and growth: Venture capital funds often involve longer holding periods and higher dispersion of returns. Secondary buyers may purchase interests at deeper discounts to account for high failure rates and longer J‑curves. In 2024 venture/growth portfolios traded at about 75 % of NAV. Demand for venture secondaries is growing as technology funds mature and early‑stage investors seek liquidity.

3.4 Pricing Dynamics and Drivers of Dispersion

Secondary pricing is influenced by macro conditions, asset quality, sector exposure, and the supply–demand balance. During periods of strong public market performance and easy access to debt, discounts tend to narrow. Conversely, market stress, rising rates or geopolitical uncertainty widen discounts. Buyout portfolios benefited from robust operating performance and strong exit prospects in 2024, enabling pricing near par. Venture and growth portfolios faced valuation resets, resulting in steeper discounts. Credit portfolios were priced at roughly 91 % of NAV, reflecting concerns about rising default rates but also offering higher coupons. GP‑led single‑asset deals displayed pricing dispersion; more than half priced at or above par, but weaker assets traded at discounts.

Section 4 – Portfolio Construction & Risk Management Implications

4.1 J‑Curve Mitigation and Vintage Diversification

Investments in private equity typically exhibit a J‑curve, where early years produce negative net cash flows due to management fees and investment outlays, followed by positive distributions in later years. Secondaries mitigate the J‑curve by acquiring interests in funds that are partially or fully invested, bringing forward cash distributions. This accelerates the cash‑return profile and reduces initial drag. Moreover, secondaries enable investors to diversify across multiple vintages quickly, smoothing exposure to macro cycles. This is particularly beneficial when the investor is launching or scaling a private market program.

4.2 Portfolio Resizing and Denominator Effect Responses

Secondaries provide a mechanism to resize overallocated portfolios. If an institution’s private equity exposure exceeds its policy target due to public‑market volatility, selling fund interests through the secondary market can bring allocations back to policy bands. Conversely, for investors under‑allocated to private assets, buying secondaries can achieve quick exposure without waiting for primary commitments to be called.

4.3 Trade‑offs: Information Asymmetry and Pricing versus Future Value

Despite their benefits, secondary investments involve trade‑offs. Buying interests in mature funds reduces blind‑pool risk but introduces selection risk. Sellers typically have more information about the underlying assets than buyers, leading to information asymmetry. Secondary buyers must conduct extensive due diligence, including reviewing fund documents, assessing portfolio company performance and understanding GP reputation. Pricing also reflects a trade‑off between the discount obtained today and future value creation. Paying near par for high‑quality assets may deliver lower absolute returns but lower risk; buying deeper discounts can increase return potential but may involve weaker assets or sectors out of favor.

4.4 Diversification versus Concentration in GP‑Led Continuation Vehicles

Single‑asset continuation vehicles offer concentrated exposure to a single company or a small number of assets. This can generate outsized returns but also increases idiosyncratic risk and reliance on the GP’s ability to create value. Multi‑asset continuation vehicles spread risk across several companies but may dilute upside. Investors should evaluate their appetite for concentration and ensure that continuation vehicle allocations fit within overall portfolio risk budgets.

4.5 Role in Multi‑Asset Portfolios

Secondaries can complement primaries, co‑investments and public markets within diversified portfolios. They provide mid‑life exposure to private companies, diversify across vintages and strategies and offer potentially quicker cash returns. When combined with direct co‑investments, secondaries can help investors calibrate their overall exposure to specific sectors or managers. In multi‑asset portfolios, secondaries may serve as a source of returns that are less correlated with public equity markets and can improve risk‑adjusted performance.

Section 5 – Practical Considerations for Wealth Managers & Advisors

5.1 Access Channels

Wealth managers and advisors can access secondary markets through several channels:

1. Dedicated secondary funds: Commingled vehicles managed by specialized secondary managers provide diversified exposure across strategies and vintages.
2. Funds of funds: Multi‑manager platforms may offer secondary sleeves alongside primaries and co‑investments.
3. Evergreen and interval funds: ’40‑Act or UCITS structures provide periodic liquidity and often incorporate secondary investments to manage cash flows.
4. Feeder funds and bespoke solutions: Advisors may work with sponsors to create feeder vehicles that pool client capital to invest in specific secondary deals or portfolios.

5.2 Educational and Operational Considerations

Client communication: Advisors should explain the mechanics of secondary transactions, including the sources of return (discount capture, underlying portfolio growth), the timing of distributions and the liquidity characteristics. It is important to set expectations that secondary investments remain illiquid and may require holding periods of 3–7 years or longer.

Liquidity expectations versus reality: While secondary investments typically return capital faster than primaries, they are still private and not redeemable on demand. Evergreen funds may offer periodic redemption windows, but advisors should ensure clients understand the potential for gating or delayed redemptions.

Reporting and valuations: Secondary portfolios are valued using fair‑value estimates provided by fund managers or third‑party appraisers. Valuations may lag public markets. Advisors should communicate the inherent uncertainty in valuations and the possibility of mark‑to‑market volatility, especially in periods of market stress.

5.3 Questions for Investment Committees and Clients

Before allocating to secondaries, investment committees and clients should consider the following questions:

1. Objectives: What are the primary goals of the secondary allocation (e.g., J‑curve mitigation, liquidity, vintage diversification)?
2. Risk tolerance: How much illiquidity and idiosyncratic risk are we willing to accept? Does a single‑asset continuation vehicle fit within our risk budget?
3. Manager selection: What is the track record of the secondary manager? How do they source deals and manage information asymmetry?
4. Pricing discipline: What discount to NAV or target return is required to justify the investment? How do we assess potential future value creation?
5. Portfolio integration: How does the secondary allocation interact with existing primaries, co‑investments and public equities?

Section 6 – Key Risks, Caveats, and Future Outlook

6.1 Major Risks and Caveats

1. Illiquidity: Despite offering shorter holding periods than primaries, secondaries remain illiquid private investments. Redemption mechanisms in evergreen funds may be limited or subject to gates.
2. Valuation risk: NAVs are based on periodic appraisals and may not reflect real-time market conditions. Sudden macro shocks can lead to valuation adjustments and negative performance.
3. Manager selection risk: Secondary performance varies widely across managers. Top-quartile managers often deliver significantly higher returns than median managers. Selecting experienced managers with robust sourcing and underwriting capabilities is crucial.
4. Concentration and leverage: Single‑asset continuation vehicles can create concentrated exposure. Some secondary funds employ leverage to enhance returns, which amplifies losses in downturns.
5. Vintage clustering: Buying secondaries from similar vintages or sectors can lead to correlated outcomes. Diversifying across vintages and strategies mitigates this risk.
6. Regulatory and governance risk: GP‑led deals require careful attention to alignment of interests, fee structures and conflicts of interest. Investors should ensure that advisory committees and independent valuations are in place.

6.2 Scenario‑Based Outlook

Higher‑for‑longer interest rates and slow growth: In a scenario where rates remain elevated and economic growth slows, financing costs for private companies may rise, potentially widening discounts. Demand for private credit secondaries could increase due to floating‑rate yields. Infrastructure and real asset secondaries may benefit from inflation linkages.

Economic recovery and declining rates: A rebound in growth and a decline in interest rates could narrow discounts and increase exit opportunities, boosting secondary transaction volume. Pricing could move closer to or above NAV, benefiting sellers. GP‑led transactions may proliferate as managers seek to crystallize value in favorable markets.

Prolonged exit drought: If IPO and M&A markets remain subdued, funds will continue to hold assets longer. LPs may use secondaries to manage liquidity, driving sustained high volume. Pricing may remain bifurcated between high‑quality assets and those facing headwinds.

6.3 Future Developments

1. Expansion into new asset classes: Secondary markets are likely to extend further into private credit, infrastructure, real assets and even private debt securitizations. Growth in continuation vehicles for infrastructure and energy transition assets may accelerate.
2. Greater retail participation: Interval funds, ’40‑Act and ELTIF vehicles will allow high‑net‑worth and mass affluent investors to access secondary investments. Platforms enabling fractional ownership may emerge.
3. Increased transparency and data standardization: Industry efforts to standardize reporting and valuation methods will enhance price discovery and encourage more participants. Market indices and benchmarks for secondaries could become more widely adopted.
4. Technology and secondary platforms: Digital platforms are emerging to match buyers and sellers and to streamline due diligence. Blockchain and tokenization could facilitate fractional trading and broader access.
5. Regulatory evolution: Regulators may issue guidance on valuation practices, liquidity management and disclosure requirements for GP‑led transactions. Policy changes could either foster or constrain market growth.

Closing – What This Means for Investment Committees and CIOs

Secondary markets have evolved into a strategic tool for portfolio construction and liquidity management. Over the next five to ten years, secondary activity is likely to remain robust, supported by the continued expansion of private capital, innovations in transaction structures and growing participation by retail and institutional investors. Investment committees and CIOs should integrate secondary investments within their alternatives programs, but they must do so thoughtfully, considering risk tolerance, manager selection and portfolio integration.

Questions for Further Reflection

1. How should we size secondary allocations relative to primaries and co‑investments? What allocation ranges are appropriate given our overall risk budget and return objectives?
2. Which segments (LP‑led, GP‑led, credit, infrastructure) align with our liquidity needs and investment philosophy?
3. What manager due diligence processes should we adopt to evaluate secondary strategies? How do we assess sourcing capability, underwriting skill and alignment of interests?
4. How will macroeconomic scenarios (e.g., rate cycles, exit environments) influence our secondary investment pace? How can we build flexibility to adapt to changing conditions?
5. Do our governance policies adequately address conflicts of interest in GP‑led transactions? Should we require independent valuations and fairness opinions for continuation vehicles?

Ultimately, secondaries offer a compelling complement to traditional private market exposure. By understanding the drivers of growth, market segments, pricing dynamics and risk considerations, asset allocators and advisors can harness secondary markets to enhance portfolio outcomes and provide liquidity solutions for their stakeholders.