The private equity secondaries market has gone from a niche corner of institutional finance to one of the fastest-growing segments of alternative investments. In 2025, global secondary transaction volume reached a record of about $240 billion, up 48% from the year before, according to Jefferies. Understanding why this market exists, and why it’s accelerating now, is increasingly relevant for sophisticated investors looking beyond traditional public markets.
Secondary funds, in short
A secondary fund buys existing stakes in private equity, venture, credit, or real estate funds from investors who want to sell early, or invests alongside managers in GP-led continuation vehicles. Because the underlying funds are already invested, the buyer can see what it owns, often pays below the reported net asset value (NAV), and may receive cash back sooner than with a new fund. The trade-offs are illiquidity, layered fees, and the risk that reported values are too high.
What Are Secondaries?
In the simplest terms, a “secondary” is the purchase of an existing interest in a private fund. When an investor commits capital to a private equity, venture capital, real estate, or infrastructure fund, that commitment is typically locked up for 10–12 years. There is no stock exchange to sell on. But over the life of the fund, circumstances change — an investor may need liquidity, want to rebalance, or face regulatory pressure to reduce exposure. The secondary market allows that investor to sell their fund interest to a willing buyer, usually at a negotiated price relative to the fund’s reported net asset value (NAV).
Types of Secondary Transactions
LP-Led Secondaries (Traditional)
The original form of secondary transaction: a limited partner (LP) sells their interest in one or more funds to a buyer. The buyer steps into the seller’s position, inheriting the remaining unfunded commitments, the existing portfolio of investments, and the distribution rights. Pricing is typically expressed as a percentage of the most recent reported NAV — for example, buying at “87 cents on the dollar” means paying 87% of NAV.
GP-Led Continuation Vehicles
The fastest-growing segment of the market. In a GP-led transaction, the fund’s general partner (GP) creates a new “continuation vehicle” to hold one or more portfolio companies that need more time to reach their full potential. Existing LPs can choose to roll their interest into the new vehicle or cash out at the transaction price. GP-led deals reached about $115 billion in 2025, roughly 48% of all secondary volume, according to Jefferies’ Global Secondary Market Review.
Direct Secondaries and Preferred Equity
Direct secondaries involve purchasing a specific company or asset directly from a fund, rather than buying the LP interest. Preferred equity solutions provide structured capital to GPs or LPs — often with a fixed return preference — as an alternative to a traditional sale. Both are growing in sophistication as the market matures.
| Primary fund commitment | Secondary fund (LP interests) | Direct or GP-led secondary | |
|---|---|---|---|
| What you buy | A commitment to a new fund that has not invested yet | Existing stakes in many funds, bought from investors who want out | A stake in one or a few companies, often through a continuation vehicle |
| What you can see | A blind pool: the manager picks the investments later | The underlying portfolio, before you buy | Specific companies you can underwrite in depth |
| Price | Committed at par, with fees from day one | Negotiated, often below reported NAV | Negotiated, typically closer to NAV than LP portfolios |
| When cash comes back | Slowly at first (the J-curve) | Can start sooner, since the funds are already invested | When the specific assets are sold |
| Diversification | Across the companies the fund eventually buys | Often dozens to hundreds of companies | Concentrated in a few assets |
Why Is There So Much Supply?
The current surge in secondary supply is driven by several converging forces:
The Denominator Effect: Endowments and Pensions Rebalancing
University endowments, state pension funds, and other institutional investors typically operate under strict investment policy statements (IPS) that set target allocations to each asset class. When public equity and fixed income markets decline — as they did sharply in 2022 — the total portfolio value drops, but private holdings (which are marked less frequently) do not decline proportionally. The result is that private investments suddenly represent a larger percentage of the total portfolio than the IPS allows.
This “denominator effect” forces institutions to sell private fund interests on the secondary market to bring their allocations back within policy limits. It’s not that the private investments are performing badly — in many cases they are performing well. The selling is driven by portfolio construction discipline, not investment judgment.
Rising Interest Rates Have Slowed Exits
The Federal Reserve’s aggressive rate-hiking cycle from 2022 through 2023 dramatically changed the economics of private equity deal-making. Higher borrowing costs mean leveraged buyouts are more expensive to finance. Valuation gaps have widened between what sellers want and what buyers will pay. IPO markets have been largely shut for all but the most compelling companies.
The result: private equity funds are holding portfolio companies longer, distributions back to LPs have slowed to a trickle, and investors who expected to recycle capital from exiting investments are sitting on illiquid positions instead. According to Bain & Company’s 2024 Global Private Equity Report, total unsold PE portfolio value (unrealized NAV) exceeded $3.2 trillion at the end of 2023 — a record. This backlog of unrealized value is one of the primary drivers of secondary supply.
Regulatory and Balance Sheet Pressures
Banks and insurance companies face capital adequacy requirements that penalize illiquid private holdings. As regulators have tightened standards, some financial institutions have been forced sellers of private fund interests. Japanese regional banks, European insurers, and certain sovereign wealth funds have all been active sellers in the secondary market as they restructure their portfolios.
Why Buyers Are Interested
For investors entering the secondary market as buyers, the appeal comes from several structural advantages:
- Discount to NAV. Secondary interests historically trade at discounts to net asset value. In 2025, LP portfolios averaged about 87% of NAV, with buyout interests near 92% and real estate near 70% (Jefferies). This discount provides a margin of safety and enhanced return potential.
- J-curve mitigation. Primary private equity fund commitments typically produce negative returns in the early years as management fees are charged against uncalled capital. A secondary buyer enters a fund that is already partially or fully invested, bypassing the J-curve and accelerating the path to positive returns and distributions.
- Visibility into the portfolio. A secondary buyer can evaluate the fund’s existing portfolio companies — actual operating performance, revenue growth, margin trends — rather than committing capital to a “blind pool” that the GP has not yet deployed. This information advantage reduces underwriting risk significantly.
- Shorter duration. Because the underlying investments are already several years into their lifecycle, the time to exit is shorter than a primary fund commitment. This appeals to investors who want private market exposure without a 12-year lockup.
- Diversification. A single secondary portfolio can provide exposure to dozens or hundreds of underlying companies across multiple vintage years, geographies, sectors, and GP strategies.
Market Size and Growth
Jefferies reports that global secondary volume reached a record of about $240 billion in 2025, up 48% from 2024, with GP-led deals making up nearly half. Even so, annual secondary volume is a small fraction of the value held in private funds, which is why many observers expect the market to keep growing as private markets mature.
Major secondary-focused firms include Lexington Partners (now part of Franklin Templeton), Ardian, Coller Capital, Whitehorse Liquidity Partners, and Blackstone Strategic Partners. Several of these firms have raised dedicated secondary funds exceeding $10 billion. The institutional infrastructure supporting the market — advisory firms like Jefferies, Evercore, and Campbell Lutyens that broker transactions — has also expanded significantly.
Worked example: buying at a discount
A limited partner in a six-year-old buyout fund needs liquidity and sells their stake, which the fund reports at a net asset value of $1,000,000. A secondary buyer pays 88% of NAV, or $880,000.
| Amount | |
|---|---|
| Reported NAV | $1,000,000 |
| Purchase price (88% of NAV) | $880,000 |
| Gain if the portfolio is eventually realized at reported NAV | $120,000 (13.6%) |
Unlike a new fund commitment, the buyer’s capital goes to work immediately in companies that are already known, and distributions may begin within a few years, which reduces the “J-curve” of early fees and slow returns. The discount is not free money, though: it may reflect a stale or optimistic NAV, weaker remaining assets, or unfunded commitments the buyer inherits.
Hypothetical and simplified for illustration; secondary pricing varies widely by market conditions, fund age, and asset quality.
How Individual Investors Access Secondary Funds
Institutions buy fund stakes directly. Individuals usually reach secondaries through a fund, and the wrapper matters as much as the strategy:
A traditional private fund that buys secondaries over a few years. Minimums are often $250,000 to $5 million or more, usually for accredited investors or qualified purchasers. Little liquidity before the fund winds down.
Registered tender-offer or interval funds that buy secondaries continuously. Generally much lower minimums and periodic repurchase offers, often limited to a small percentage of shares per quarter. Fees can be layered.
A private bank or platform pools clients into a large secondary manager’s fund at a lower minimum. Convenient, but it typically adds its own fee layer, and the menu is chosen by the provider.
Whichever route you use, compare total fees (including the fees of the underlying funds), how often the fund can actually return capital, how holdings are valued, and how much of your overall wealth is already tied up in private investments. For a broader view of private markets, see our guides to private credit, alternative investments, and private bank vs. independent advisor.
Evaluating a secondaries fund?
We’ll compare the structure, fees, and liquidity terms, and show how it fits with the private investments you already hold.
Schedule a call →Buying secondaries through a wirehouse or private bank
If your accounts are at a wirehouse or private bank, the secondaries you are offered are usually the funds that firm has chosen to put on its platform, often through a feeder fund that adds its own placement or administration fee. That is not necessarily a bad deal, but the menu is the firm’s, not the whole market. Ask what the feeder adds in total cost, which other secondaries managers were considered, and whether the firm or your advisor is paid more for this fund than for others. An independent advisor can put a platform feeder side by side with registered evergreen funds and direct fund access. See how the two models compare in our wirehouse vs. independent advisor guide.
Risks and Considerations
Secondaries are not without risk:
- NAV accuracy. Buying at a discount to NAV is only advantageous if the NAV is approximately correct. If underlying portfolio companies are overvalued, the “discount” may be illusory.
- Unfunded commitments. When buying an LP interest, the buyer typically assumes the remaining unfunded commitment. If a fund is only 60% called, the buyer must be prepared to fund the remaining 40% when the GP makes capital calls.
- Complexity and diligence. Evaluating a portfolio of 20–40 underlying companies across different stages and sectors requires significant analytical resources. This is not a passive investment.
- Illiquidity. While the secondary market provides more liquidity than holding to the end of a fund’s life, secondary fund interests are still private and illiquid. Investors should plan for a 3–7 year hold.
- Layered fees. Secondary funds charge their own fees on top of the fees of the underlying private funds they buy. Ask for the all-in cost.
- Access barriers. Traditional secondary drawdown funds often require commitments of $250,000–$5 million. Some of the largest and best-performing funds are capacity-constrained and selective about their investors.
Frequently Asked Questions
What are secondary funds?
Secondary funds buy existing investments in private funds from other investors, rather than committing to new funds. A typical secondary fund purchases limited partnership interests in private equity, venture, credit, or real estate funds from investors who want to sell early, or invests in GP-led continuation vehicles. Because the underlying funds are already invested, buyers can see the portfolio, often pay a price below the reported net asset value (NAV), and may receive distributions sooner than in a new fund.
What is a GP-led continuation fund?
A GP-led continuation fund is a secondary transaction in which a fund’s general partner moves one or more portfolio companies into a new vehicle, giving existing investors the choice to cash out or roll their interest into the new fund. According to Jefferies, GP-led deals totaled about $115 billion in 2025, roughly 48% of secondary market volume. These deals let managers keep strong assets longer while offering liquidity to investors who want out.
Why do secondary fund interests trade at a discount to NAV?
Sellers often need liquidity, want to rebalance, or face regulatory pressure, and buyers take on illiquidity and the risk that reported values are stale. Pricing varies widely. Jefferies reports that LP portfolios averaged about 87% of NAV in 2025, with buyout interests near 92%, credit about 91%, venture and growth about 78%, and real estate about 70%. Younger funds tend to price higher than older, tail-end funds.
What minimums apply to secondary deals?
It depends on the vehicle. Traditional secondary drawdown funds often require commitments of $250,000 to $5 million or more and are usually limited to accredited investors or qualified purchasers. Semi-liquid evergreen secondary funds, structured as registered tender-offer or interval funds, generally have much lower minimums and continuous subscriptions, although sponsors set their own eligibility standards. Buying an LP interest directly usually requires far larger amounts and is rare for individuals.
How can individual investors invest in secondary funds?
Most individuals access secondaries in one of three ways: a dedicated secondary drawdown fund, a semi-liquid evergreen fund that buys secondaries and offers periodic repurchases, or a feeder fund offered through a private bank or investment platform. Each has different minimums, fees, liquidity terms, and eligibility requirements, so compare them in the context of your overall private-markets allocation.
What are the risks of secondary transactions?
Key risks include paying a discount to a NAV that is itself overstated, inheriting unfunded commitments that must be paid when capital is called, two layers of fees in fund-of-funds structures, limited liquidity even in semi-liquid funds, concentration in a few assets in GP-led deals, and the complexity of evaluating many underlying companies.
How do direct secondary stakes compare with buying fund interests?
Buying LP fund interests, usually through a secondary fund, spreads your money across many funds and companies, and LP portfolios have tended to trade at larger discounts to NAV. GP-led secondaries (continuation vehicles) concentrate the investment in one or a few companies the manager chose to keep, so they offer deeper insight into each asset but less diversification, and they are typically priced closer to NAV. Many secondary funds hold both, so check the mix before you invest.
Should I buy secondaries through my wirehouse or private bank?
You can, but the choice is usually limited to the funds on that firm’s platform, often through a feeder fund with its own added fee. Compare the feeder’s total cost with registered evergreen funds and direct fund access, and ask whether the firm earns more from the fund it is recommending.
The Bottom Line
The private market secondaries boom is not a temporary blip — it is a structural shift driven by the sheer scale of private capital, institutional rebalancing, and slower exits that have left many investors waiting for distributions. For investors who can access the market, secondaries offer a compelling combination of discount entry, portfolio visibility, J-curve mitigation, and shorter duration relative to primary fund commitments.
At Rubiq, we help clients evaluate secondary opportunities within the context of their broader portfolio — weighing the liquidity tradeoffs, assessing manager quality, and ensuring any allocation fits alongside existing alternative investment and rebalancing strategies.
