The Private Markets Secondaries Boom: An Investor's Guide

Private markets, encompassing private equity and private credit, have long been characterised by their illiquidity. Investors typically commit capital for a decade or longer, with limited options for an early exit. This long-term horizon has historically restricted access to large institutional bodies. However, a sophisticated and rapidly growing segment of the market exists to address this very challenge: the private market secondaries market.

This market provides a mechanism for investors in private funds to sell their positions before the fund's natural termination. It is not a new concept, but its scale has expanded considerably. From a niche corner of finance, it has matured into a vital component of the private capital ecosystem, with annual transaction volumes now consistently exceeding $100 billion globally. As of late 2025, the market is estimated to have supported approximately $150 billion in transactions over the preceding 12-month period.

For buyers, the secondaries market offers a differentiated entry point into private assets. It allows for immediate deployment of capital into mature portfolios, offering diversification and a potentially shorter route to returns. The market is broadly divided into two categories of transactions: those initiated by the investors, known as Limited Partners (LPs), and those structured by the fund managers themselves, known as General Partners (GPs). Each serves a distinct purpose and presents different considerations for the investor.

Historically, the secondaries market was primarily a venue for distressed sellers. An institutional investor, or LP, facing a liquidity crunch or a change in strategy might be forced to sell its private fund interest at a steep discount. This created a perception of the market as a place for opportunistic, deep-value buyers preying on necessity. While this segment still exists, the market's primary function has evolved significantly.

Today, secondaries are a strategic portfolio management tool for both LPs and GPs. LPs may sell positions to rebalance their portfolios, crystallise returns, or simply reduce the number of manager relationships they have. These are often high-quality assets sold by motivated, but not distressed, sellers. This shift has brought more stability and predictability to the market.

The most significant evolution, however, has been the rapid emergence of GP-led transactions. Rather than a passive investor selling their stake, a GP-led deal is one actively initiated by the fund manager. This innovation has transformed the landscape, accounting for more than half of all transaction volume in recent years. It allows GPs to offer liquidity to their investors while continuing to manage prized assets, a fundamental change from the traditional LP-led model.

Understanding the distinction between LP-led and GP-led secondaries is fundamental. An LP-led secondary is the classic form of transaction. It involves a single investor (the LP) selling their interest in a private fund to a secondary buyer. The buyer acquires both the existing portfolio of investments within the fund and the obligation to meet any future capital calls associated with that interest. The transaction is typically managed by a specialist intermediary who runs an auction process to achieve a competitive price for the seller.

A GP-led secondary, by contrast, is a more complex and structured transaction orchestrated by the fund manager. These have become a dominant force in the market. The most common form is the continuation vehicle. Here, a GP identifies one or several high-performing assets in an older fund that it believes have further growth potential. The GP then arranges to sell these assets from the old fund into a newly created continuation fund.

Existing LPs in the old fund are given a choice: they can sell their share of the assets for cash (thereby achieving liquidity) or they can roll their proceeds into the new continuation vehicle to participate in the future upside. This structure provides a solution for assets that would otherwise need to be sold to meet the old fund's 10-year lifespan. Other forms of GP-led deals include strip sales, where a portion of multiple assets are sold to a secondary buyer, and single-asset deals, which are a concentrated form of continuation vehicle.

For buyers, including retail investors accessing the market through specialised funds, the appeal of secondaries lies in three principal advantages over traditional 'primary' fund investing. These factors can lead to a more attractive risk-return profile.

First is the mitigation of the J-curve. In a primary fund, investors' returns typically dip into negative territory in the early years as investment costs and management fees are charged before the underlying portfolio companies have had time to grow in value. Secondaries bypass this initial phase by acquiring stakes in funds that are already several years into their life, often with a portfolio of mature and cash-generating companies. This can result in a shorter path to positive cash flow and distributions.

Second, secondaries offer immediate asset visibility. A primary fund is a 'blind pool'; investors commit capital without knowing the specific companies the fund will acquire. A secondary transaction, particularly in an LP-led deal, provides a buyer with full transparency on an existing portfolio of companies. This allows for detailed due diligence on assets that are already operating, significantly reducing the 'blind pool' risk.

Finally, secondaries are a powerful tool for achieving instant diversification. A single secondary transaction can provide exposure to hundreds of underlying companies across multiple sectors, geographies, and vintage years (the year a fund began investing). For a retail investor with a typically smaller allocation, building such a diversified portfolio through primary funds would take many years and significant capital.

Secondary transactions are typically priced by referencing the fund's most recent Net Asset Value (NAV). The price is expressed as a percentage of NAV, which can be a discount (e.g., 90% of NAV) or, more rarely, a premium. The size of the discount reflects factors such as the quality and maturity of the assets, the reputation of the GP, and broader market sentiment.

The period from 2022 to 2024 represented a significant inflection point for secondary pricing. The sharp rise in global interest rates created what is known as the 'denominator effect' for large institutional investors. As the value of their public market holdings fell, their allocation to private markets proportionally increased, breaching internal policy limits. This forced many institutions to sell private fund interests to rebalance, dramatically increasing the supply of LP-led deals available on the market.

This surge in supply, coupled with buyer caution in an uncertain macroeconomic environment, resulted in a pronounced widening of discounts. Average pricing fell from near-par in 2021 to discounts in the high teens for buyout funds. By late 2025 and into 2026, pricing has seen a recovery as the market has absorbed the supply and rate volatility has subsided. However, the pricing environment remains notably more favourable for buyers than during the pre-2022 period, offering attractive entry points for well-capitalised secondary funds.

The proliferation of GP-led secondaries, particularly continuation vehicles, has been a defining feature of the modern private equity landscape. The primary driver is a desire by GPs to extend their ownership of high-quality, 'crown jewel' assets beyond the constraints of a traditional 10-year fund term. For a successful company that continues to perform, a premature sale can feel like a suboptimal outcome for managers and investors alike.

Despite their utility, these transactions are fraught with potential conflicts of interest that require careful management. The central issue is that the GP sits on both sides of the table: it is the seller on behalf of the old fund's LPs and the manager (and often a significant investor) of the new continuation vehicle. This immediately raises questions about whether the transaction price fairly compensates the exiting LPs.

Regulatory bodies and industry groups like the Institutional Limited Partners Association (ILPA) have issued guidance to improve transparency and fairness. Best practice now dictates a robust process involving independent valuation agents and an active role for the fund's Limited Partner Advisory Committee (LPAC). Even so, debates continue around the alignment of incentives, particularly concerning the new management fees and carried interest that the GP earns on the continuation vehicle, which serves as a powerful economic driver for undertaking the transaction.

The secondary market is concentrated among a group of large, highly specialised investment firms that have dedicated decades to honing their expertise. These managers combine the valuation skills of a direct investor with the portfolio construction capabilities of a fund-of-funds manager. Their scale allows them to execute the largest and most complex transactions, often involving portfolios worth billions of pounds.

The most prominent names in the industry include firms like Ardian, which is headquartered in Paris, and a host of US-based managers with major London offices, such as Lexington Partners (part of Franklin Templeton), HarbourVest Partners, Coller Capital (part of Nippon Life), and Pantheon. These firms collectively manage hundreds of billions in capital dedicated exclusively to secondary strategies.

Their role is critical. They provide the bulk of the capital that lubricates the market, acting as the primary counterparty for both LPs seeking liquidity and GPs structuring continuation vehicles. For UK investors, the UK and European operations of these global players are particularly relevant, as they often manage the funds and trusts that provide a route to retail access.

For many years, direct investment in private equity secondaries was the exclusive preserve of institutional investors. However, several routes now exist for UK-based retail and advised private clients to gain exposure, facilitated by evolving regulation and product innovation.

The most established path is through listed private equity investment trusts on the London Stock Exchange. These are closed-end funds whose shares can be bought and sold like any other company. Several have a specific or significant focus on secondaries. Examples include Pantheon International Plc (PIN), which is a fund-of-funds with a large secondary programme managed by Pantheon, and ICG Enterprise Trust (ICGT), which also has a material allocation to secondary investments alongside its primary and direct co-investments. These trusts provide liquidity through the stock market and professional management.

A newer structure is the Long-Term Asset Fund (LTAF). Authorised by the UK's Financial Conduct Authority (FCA), the LTAF is a new type of open-ended fund designed to facilitate investment in illiquid assets. While offering liquidity on a less frequent basis (e.g., monthly or quarterly), they provide a direct way to access private market strategies. A number of major asset managers have launched or are developing LTAFs, some of which are expected to have a significant allocation to secondary private equity. This structure is intended to widen access beyond institutional investors to a broader base of sophisticated retail clients.

While secondaries offer compelling features, they are not without risk. A discount to NAV does not, in itself, guarantee a successful investment. The NAV is ultimately an estimate of value reported by the fund's GP, and the true realisable value of the underlying assets may be materially different.

Investors must consider the inherent risks of the underlying asset class. Private equity investments often involve significant financial leverage (debt) to finance acquisitions, which can amplify both gains and losses. The performance of the underlying portfolio companies is tied to the health of the broader economy, and a downturn can impact valuations and a fund's ability to sell assets at a profit.

Furthermore, manager selection remains paramount. The success of a secondary investment is highly dependent on the skill of the secondary fund's manager. Their ability to source attractive deals, conduct thorough due diligence on hundreds of underlying companies, and correctly price the risk they are acquiring is the ultimate determinant of returns. An investor is backing the expertise of the secondary manager as much as they are the underlying assets.

The private market secondaries ecosystem has evolved from a niche solution for distressed sellers into a sophisticated and integral part of the private capital world. It serves as a critical liquidity provider and a strategic tool for portfolio management, with GP-led transactions in particular reshaping how General Partners manage assets and deliver returns to investors.

For UK retail investors, what was once an inaccessible institutional domain is gradually opening up. Through listed investment trusts and the development of new structures like the LTAF, it is now possible to gain professionally managed exposure to the diversification and J-curve mitigation benefits that secondaries can offer. However, the complexity of the transactions and the inherent risks of private equity mean that thorough diligence is essential.

The pricing dynamics of recent years have created a potentially attractive entry point, but this does not remove the need for a long-term perspective. As with all private market investing, success is measured in years, not months, and specialist expertise remains the key to navigating this complex but rewarding territory.