Secondaries buy other people’s private equity fund stakes below stated value; the discount is the whole edge, and it is being competed away as record capital crowds in.
Key takeaways
- The market is now enormous and growing fast. Secondary volume hit a record $240 billion in 2025, up 48 per cent, split roughly evenly between investor-led sales at $125 billion and manager-led deals at $115 billion.
- The fuel is a liquidity drought. Distributions fell to 11.2 per cent of value in 2023, the lowest since 2009, with $3.2 to $3.6 trillion of unrealised value waiting for an exit.
- The edge is buying below stated value. In the first half of 2025 the average investor portfolio priced at roughly 90 per cent of net asset value, and buyout portfolios near 94 per cent, a built-in discount before any growth.
- The vehicle is the whole decision. A $30 billion institutional fund, a retail evergreen carrying around 5 per cent in annual all-in cost, and a London-listed trust trading at a wide discount to NAV are the same asset class wrapped very differently.
- The main risk is a conflict of interest. In manager-led deals the sponsor sits on both sides, setting valuations and selecting which assets move, which is why regulators now demand a fairness opinion.
The 60-Second Version
Private equity used to be a one-way door. You committed your money to a fund, you waited a decade, and you got out only when the manager sold the underlying companies. There was no early exit, no bid, no way to change your mind. Secondaries are the market that grew up to solve that problem, a place where existing investors sell their fund stakes to someone else before the fund runs its full course. That single mechanism has quietly become one of the largest and fastest-growing corners of private markets.
The scale is no longer niche. Global secondary transaction volume reached a record $240 billion in 2025, up 48 per cent on the year, and the dedicated capital raised specifically to buy these stakes hit a record $327 billion. The reason is structural. Private equity stopped handing money back. Distributions as a share of fund value fell to 11.2 per cent in 2023, the lowest since 2009, leaving something like $3.2 to $3.6 trillion of unsold, unrealised value trapped in tens of thousands of companies. When the front door of private equity jams shut, the side door, the secondary market, gets busy.
The appeal to a buyer is straightforward. You often buy a mature, already-built portfolio at less than its stated value, and you get money back sooner than a first-time investor would. But “buying below value” is not a free lunch. The person setting that value sometimes sits on both sides of the table, and the newest retail versions of these funds come with their own trade-offs. The opportunity, the risks, and the most sensible ways to get exposure, wherever you are resident, are set out below.
I. What Private Equity Secondaries Actually Are
Start with the thing being traded. A private equity fund interest is a legal claim on a private equity fund, the position an investor holds after committing money to a manager who then buys private companies with it. That investor is called a limited partner, or LP: “limited” because their liability and their control are both capped, and “partner” because a private equity fund is legally a partnership. The manager running the fund is the general partner, or GP. Hold those two terms, because the entire market divides along the line between them.
A secondary, sometimes called a secondaries transaction, is the sale of an existing fund interest from one investor to another before the fund has finished its life. The “primary” market is where you commit fresh money to a brand-new fund at the start. The secondary market is the resale shop, where someone who already owns a stake sells it on and the buyer steps into their shoes for whatever remains of the fund’s life. Every deal in the asset class is a variation on that one transaction.
There are two broad flavours, and the difference between them shapes almost everything else in the asset class. In an LP-led deal, an existing investor initiates the sale. They want out, or want cash, and they auction their stake to secondary buyers. In a GP-led deal, the manager initiates it, typically by moving one or more companies out of an ageing fund and into a new vehicle called a continuation vehicle (a fresh fund set up to hold assets the manager wants to keep owning), giving the original investors the choice to cash out or roll over. In 2025 the market split almost evenly, per Jefferies: LP-led deals were $125 billion, or 52 per cent, and GP-led deals were $115 billion, or 48 per cent. The two behave differently, price differently and carry different risks, and experienced buyers treat them as separate businesses.
The reason any of this exists is illiquidity, the plain fact that a private equity commitment normally cannot be sold. A first-time investor in a fund signs up for something like ten to twelve years with no exit ramp. The secondary market builds that ramp. It lets a seller turn a locked position into cash, and it lets a buyer acquire a seasoned portfolio without waiting a decade to see the results. The secondary market makes an illiquid asset class somewhat more liquid, and it charges for the service through the price.
II. Market History and Growth
For most of its life the secondary market was small, embarrassed and opaque. Selling a fund stake was treated as a sign of distress. You only did it if you were forced to, and prices reflected that stigma, often at steep discounts. What has happened over the past decade, and dramatically over the past two years, is that the market shed the stigma and became a routine tool of portfolio management.
The recent numbers bear this out. Volume reached $162 billion in 2024, itself a record at the time, and then jumped to $240 billion in 2025, a 48 per cent increase and the largest year ever recorded. Over two years the market roughly doubled. A second data provider, Lazard, reads 2025 volume at around $233 billion, up 53 per cent. The exact figure varies by who is counting, but the counts agree that the market set a record and grew at pace.
The manager-led half of the market is where the growth has been most striking, because it is the newer half. GP-led volume hit a record $75 billion in 2024, up from $52 billion in 2023, a jump of about 44 per cent. Individual deals have grown too. The number of GP-led transactions worth more than $1 billion rose to 29 in 2025, up from 21 in 2024, with the average continuation vehicle now around $900 million. A decade ago a billion-dollar continuation vehicle would have been a landmark event, and now several arrive in a single year.
The supply of capital chasing these deals has scaled to match. Dedicated secondary capital, money raised specifically to buy fund stakes, reached a record $327 billion in 2025, up 14 per cent from the year before, and once you add the traditional investors and borrowing that also fund these purchases, total available buying power runs to roughly $477 billion. That is a large sum of money hunting a limited pool of stakes, which bears directly on whether the discount survives.
III. The Demand Drivers
Three forces are pushing on this market at once, and they work in sequence: a cash drought creates sellers, a backlog of unsold companies supplies the inventory, and a change in how investors view the strategy pulls in the buyers.
The distribution drought is the engine. Private equity works by buying companies, improving them and selling them, then returning the cash to investors. When selling stalls, because interest rates rose, buyers and sellers disagreed on price, and the market for company sales froze, the cash stops coming back. Distributions as a share of fund value fell to 11.2 per cent in 2023, the lowest since 2009. Investors who expected regular cash to fund new commitments, pension payments or spending suddenly had none, and the fastest way to raise cash from a private equity portfolio is to sell a stake on the secondary market. The drought creates sellers.
The backlog is the raw material. All those unsold companies pile up. There are somewhere around 28,000 to 29,000 unsold private-equity-backed companies globally, holding roughly $3.2 to $3.6 trillion of unrealised value. That backlog is the inventory the secondary market draws on, and less than 5 per cent of that unrealised value clears through the secondary market each year. The market is structurally under-supplied relative to the mountain of value that could theoretically trade, which is both a growth runway and a sign that the mountain is not shrinking quickly.
The demand for the strategy itself is the third force, and the newest. Investors have started to view secondaries not as a distress tool but as a permanent portfolio holding, prized for getting money back faster and spreading risk across many funds at once. That shift in perception is what has pulled record capital into the space, and it is now reaching individual investors through a wave of retail products. As Coller Capital’s chief investment officer Jeremy Coller put it on closing a $17 billion fund in January 2026:
“Secondaries are no longer seen as a tactical portfolio rebalancing tool but a core component of diversified portfolios.”
Jeremy Coller, Chief Investment Officer and Managing Partner, Coller Capital (13 January 2026)
That reclassification, from rescue mechanism to core allocation, is what pulled the record $327 billion of dedicated capital into the space.
IV. The Players
Secondaries is a concentrated world at the top. A handful of specialist firms raise most of the dedicated capital, and you can name the people running them.
Ardian is the current scale leader. The Paris-headquartered firm raised a record $30 billion for its ninth secondaries programme, ASF IX, closed on 16 January 2025, the largest secondaries platform ever assembled. That was a big step up from its prior fund, ASF VIII, which raised $19 billion in 2020, and it lifted the firm’s total secondaries and primaries assets to $97 billion, drawn from more than 465 investors across 44 countries. Tellingly, private wealth made up 22 per cent of the fund’s capital, up from 11 per cent in the prior fund, the individual-investor money arriving in force. The firm’s co-head of secondaries, Mark Benedetti, framed the raise this way:
“These market dynamics, combined with the strength of our offering which we have cultivated for more than 25 years, have helped us achieve this record-breaking milestone.”
Mark Benedetti, Executive President and Co-Head of Secondaries, Ardian (16 January 2025)
Blackstone, through its Strategic Partners unit, is the other giant. Its ninth fund raised $22.2 billion in January 2023, and together with a $2.7 billion GP-led vehicle reached $25 billion combined, a record at the time. Blackstone matters doubly here because it also runs one of the largest retail private-equity products, BXPE.
Lexington Partners, now part of Franklin Templeton, closed $22.7 billion for its tenth global secondary fund in 2024, described as the largest-ever standalone secondary fund at close. Coller Capital, the London-founded specialist named after its founder Jeremy Coller, closed $17 billion for its ninth flagship in January 2026 and has built one of the more aggressive pushes into individual-investor products.
A newer name is joining the top tier by acquisition rather than fundraising. New Mountain Capital has become a visible force in single-asset continuation deals, including the Real Chemistry transaction. There is also movement among the buyers of the buyers. In January 2026 the listed European manager EQT agreed to combine with Coller Capital in a deal worth up to $3.7 billion, rebranding the unit “Coller EQT”. A large diversified manager paying billions to enter secondaries is a sign the industry expects the market to keep growing.
V. Geography
Secondaries is a global market by construction, because the underlying funds hold companies everywhere and the sellers sit in every major financial centre. But the flows and the wrappers cluster in identifiable regions.
North America is the largest single market for the underlying deals, simply because the US private equity industry is the largest in the world and therefore generates the most fund stakes to trade and the most companies stuck in the $3.2 to $3.6 trillion backlog. It is also where the retail closed-end structures are proliferating, and the US “tender-offer fund” wrapper is a distinctly American vehicle.
Europe is the historic home of the specialist buyers. Ardian is French, Coller Capital is British, and the Luxembourg SICAV, a pan-European fund structure, has become the default wrapper for the retail evergreen products now selling to wealthy individuals across the continent and beyond. Europe also runs its own regulated retail route, the ELTIF 2.0 regime, which lets funds offer monthly subscriptions and quarterly redemptions to EU retail investors. Ardian’s flagship drew investors from 44 countries, a reminder that European-domiciled funds gather money globally.
The United Kingdom has two distinct routes of its own. London has hosted listed private-equity investment trusts for decades, several with meaningful secondaries exposure, and it has now added the Long-Term Asset Fund, an FCA-authorised open-ended wrapper that became eligible for a Stocks and Shares ISA from 6 April 2026. Both routes are covered in Section VI.
Asia-Pacific and the rest of the world feature both as a source of sellers, with sovereign wealth funds, pensions and family offices across the Gulf and Asia rebalancing their private equity books, and as buyers of the global funds. The asset itself is jurisdiction-agnostic. A secondary fund typically buys stakes in funds that own companies spread across multiple regions, sectors and vintages at once, so a single purchase is already geographically diversified. Geography bites at the wrapper rather than the assets, because which fund structure you can access, and how it is taxed, depends entirely on where you are resident.
VI. How To Actually Invest
This is where the asset class splits into very different worlds, and where the route you can use depends on where you live. Historically, secondaries were reachable only by large institutions writing eight-figure cheques into closed-end funds. Three developments have opened the door to individuals: US and Luxembourg evergreen funds, European ELTIFs and UK LTAFs, and the oldest route of all, a London-listed investment trust you can buy through any broker.
Take the routes in turn.
The institutional closed-end fund is the traditional structure and still the largest. You commit capital for the fund’s ten-year-plus life with no early exit, and you pay a full private-equity fee load. This is the $30 billion Ardian ASF IX or the $22.7 billion Lexington fund, and the minimum runs to millions.
The evergreen fund is the retail innovation. An evergreen fund is an open-ended vehicle you can buy into and, within limits, redeem from on an ongoing basis, rather than committing for a fixed ten-year term. The convenience is genuine, and it comes with fees and redemption limits. In the US these appear as closed-end tender-offer funds such as C-SPEF; across Europe they appear as Luxembourg SICAVs such as CollerEquity and BXPE, and increasingly as ELTIF 2.0 funds aimed at EU retail investors. Partners Group launched what it called the first evergreen private equity fund inside an ELTIF structure, and Hamilton Lane’s Private Markets Access ELTIF is one of the funds built for EU-based retail investors under the 2024 ELTIF 2.0 rules. Ardian has been rolling out its own semi-liquid range, including the Ardian Access SICAV-RAIF launched in July 2025 to give exposure to its global secondaries platform.
The UK Long-Term Asset Fund is Britain’s own version of the evergreen wrapper. The LTAF is an FCA-authorised open-ended fund for illiquid assets, marketable to certain retail investors and eligible for a Stocks and Shares ISA from 6 April 2026, with a £20,000 annual ISA allowance and structural safeguards such as monthly or quarterly dealing and notice periods. The LTAF market had grown to around £7.3 billion in assets by early 2026, spread across private equity, private debt, infrastructure and real estate mandates.
The London-listed investment trust is the most liquid route of all, and the one most retail investors overlook. These are closed-end funds whose shares trade on the London Stock Exchange, so you buy and sell them through an ordinary brokerage account with daily liquidity and no minimum beyond a single share. They are fund-of-funds vehicles rather than pure secondaries plays, but several carry real secondaries exposure, and they currently trade at wide discounts to their own stated NAV, a second layer of discount on top of the one the underlying manager captures. HarbourVest Global Private Equity (HVPE) traded around 25 per cent below NAV in 2026, in from a 30 per cent one-year average, and has committed to distribute at least $500 million to shareholders during the year. ICG Enterprise Trust (ICGT) has lifted its medium-term secondaries target to 25 to 30 per cent of the portfolio, from around 15 per cent, while trading at roughly a 36 per cent discount to NAV. Pantheon International (PIN) holds primaries, secondaries and co-investments and traded around a 28 to 32 per cent discount to NAV in 2026, though it has said it is winding its fund-secondaries exposure down over time, so read the current allocation before treating it as a secondaries proxy.
The vehicles run from institutional to individual, as set out below.
| Vehicle / structure | Type | Minimum | Fees / cost | Access & liquidity |
|---|---|---|---|---|
| Ardian ASF IX | Institutional closed-end fund ($30bn) | Institutional (typically millions) | Traditional PE fee load (management fee + carried interest) | Committed for the fund’s life; illiquid |
| Lexington LCP X | Institutional closed-end fund ($22.7bn) | Institutional | Traditional PE fee load | Committed; illiquid |
| CollerEquity | Retail evergreen (Luxembourg SICAV) | ~EUR 250,000 | ~5 per cent total annual cost, all-in per KID | Monthly buy-in, quarterly redemptions with a 5 per cent NAV quarterly gate; USD/EUR/CHF |
| C-SPEF (Coller Secondaries) | US closed-end tender-offer fund | Adviser-dependent | Fund-level fees (see prospectus) | Continuously offered; periodic tender-offer redemptions. Fund NAV $1.54bn; Class I NAV $5.92, 31 May 2026 |
| BXPE (Blackstone) | Retail evergreen (Luxembourg SICAV) | Wealth-channel dependent | Evergreen fee load | Perpetual-life; launched 1 February 2024, passed $2bn AUM by January 2025. Mixes directs, secondaries and primaries |
| Hamilton Lane Private Markets Access ELTIF | EU retail evergreen (ELTIF 2.0) | Adviser / platform dependent | Evergreen fee load (see KID) | Monthly subscriptions, quarterly redemptions under ELTIF 2.0; EU-domiciled |
| Schroders / UK LTAF route | UK evergreen (FCA-authorised LTAF) | Platform dependent | Evergreen fee load | Monthly/quarterly dealing with notice; ISA-eligible from 6 April 2026, £20k allowance |
| HarbourVest Global PE (HVPE) | London-listed investment trust | One share, via any broker | Trust management fee + underlying fund fees | Daily liquidity on LSE; ~25% discount to NAV, $500m distributions in 2026 |
| ICG Enterprise Trust (ICGT) | London-listed investment trust | One share, via any broker | Trust management fee + underlying fund fees | Daily liquidity on LSE; ~36% discount, secondaries target lifted to 25 to 30% |
A few things to read out of that table. First, the minimum on a retail evergreen like CollerEquity, around EUR 250,000, is “retail” only by the standards of an asset class that used to demand tens of millions. It is still a serious cheque, which is exactly why the ISA-eligible LTAF and the single-share listed trust matter: they drop the entry point to a few hundred pounds. Second, the roughly 5 per cent all-in annual cost on CollerEquity is a genuine headwind that the discount-to-NAV edge has to overcome before you make a penny. Third, the redemption gates matter as much as the headline fees. A 5 per cent-of-NAV quarterly redemption limit means that if many investors want out at once, you may not be able to exit when you want to, so the illiquidity the asset class is known for reappears one layer up, at the fund level. The listed trusts sidestep that gate, because you sell your shares on the market rather than redeeming from the fund, but you pay for it in a volatile share-price discount instead.
Some of these products are not pure secondaries. BXPE deliberately mixes direct company investments, secondaries and primary fund commitments, and the London-listed trusts are fund-of-funds that hold primaries and co-investments alongside secondaries. Buying any of them is not the same as buying a dedicated secondaries strategy. Check the mandate rather than the marketing before you commit.
VII. The Unit Economics
The financial case for secondaries rests on one mechanic: buying a fund stake for less than its stated value, then collecting the full value as the underlying companies are sold. The term that makes it work is net asset value. Net asset value, or NAV, is the manager’s stated value of the fund’s holdings, what the portfolio is supposedly worth on the books. A secondary buyer pays a price expressed as a percentage of that NAV, and the gap between the price and the NAV is the discount.
Recent pricing gives us real numbers to work with. In the first half of 2025 the average investor portfolio priced at roughly 90 per cent of NAV, and buyout portfolios, the largest, most stable category, priced near 94 per cent, an implied discount of around 11.6 per cent on the underlying holdings. Pricing also depends heavily on how old the fund is: buyout funds three years old or younger priced at about 99 per cent of NAV, while funds four to six years old priced around 96 per cent, with older and venture-heavy portfolios trading at deeper discounts. Newer, better-understood portfolios command higher prices; older or riskier ones sell cheaper.
A worked example makes the mechanic concrete. Take a buyout fund interest with a stated NAV of $100 million, bought at the 94 per cent of NAV buyout portfolios were fetching:
- Purchase price: 94 per cent of $100m = $94 million cost.
- Day-one position: you now own holdings the manager values at $100 million, for which you paid $94 million.
- If the underlying companies simply exit at their carrying value, sold for exactly the $100 million they are marked at, with no further growth, you receive $100 million against a $94 million cost.
- The result: a $6 million uplift, roughly a 6.4 per cent gross gain, captured purely from the discount, before any operational improvement in the companies.
That built-in uplift is what practitioners mean when they describe secondaries as offering an immediate valuation step-up that mitigates the J-curve. The J-curve is the early-life pattern of a private equity fund where returns dip below zero first, because fees are charged before any gains arrive, before recovering later as companies are sold. Because a secondary buyer acquires a seasoned, already-deployed portfolio rather than an empty new fund, the money starts coming back sooner and the early loss-making dip is flattened.
Two cautions on that arithmetic. The example assumes the companies exit at carrying value; if the manager has over-marked the portfolio, valued it too generously, your “discount” was an illusion and you may have paid full price for less. And in the real world you also pay the fund’s own fees on top: a roughly 5 per cent all-in annual cost on a retail evergreen eats into that 6.4 per cent gross edge every year you hold. The discount is where the return starts, and fees and the eventual exit price determine how much of it you actually keep.
VIII. Macro Sensitivity
Secondaries have an unusual relationship with the economic cycle: the supply of things to buy tends to rise exactly when conditions are bad, because bad conditions are what make investors want to sell. That counter-cyclicality is the defining macro feature. A downturn both increases the number of stakes coming to market and widens the discount sellers will accept, so a buyer gets more to choose from and a better price at the same time.
| Regime | What happens to sellers | What happens to pricing | Net effect for a buyer |
|---|---|---|---|
| Falling markets / frozen exits | Supply surges. Investors need cash and the exit door is shut, exactly the 11.2 per cent distribution low of 2023 | Discounts widen; motivated sellers accept lower prices | Best entry point. More stakes, cheaper, but the underlying value may still be falling |
| Recovery / thawing exits | Supply stays high as the backlog of $3.2 to $3.6tn works through | Discounts tighten as confidence returns; pricing rose from ~85% of NAV in 2023 toward ~90%+ in 2025 | Strong. Plenty of supply, valuations firming, the record-volume regime of 2024 to 2025 |
| Booming markets / open exits | Supply softens. Investors get cash from normal exits and have less reason to sell | Discounts narrow or vanish; stakes may even trade above NAV | Weakest for the discount edge. The core advantage compresses |
| Rate shock / stress | Supply spikes from forced sellers needing liquidity fast | Discounts widen sharply on distressed stakes | High-return potential but highest risk of buying into a portfolio being marked down |
The two record years, $162 billion in 2024 and $240 billion in 2025, coincided with the worst distribution drought since 2009, and the timing reflects the mechanism at work. Secondaries volume rises with pain elsewhere in private equity, which is why the asset class markets itself partly as a diversifier: it tends to be busiest, and best-supplied with bargains, precisely when the rest of a portfolio is struggling.
The caution sits in the recovery-and-boom regimes. The discount is the entire edge, and it depends on seller desperation. When markets are calm and cash is flowing, that desperation evaporates, pricing climbs toward and occasionally above NAV, and the built-in uplift the whole strategy depends on can shrink to nothing. A buyer deploying at the top of a calm market is buying the same asset with far less of a cushion.
IX. Tax
This section is general and jurisdiction-neutral, and it is not tax advice. How you are taxed on a secondary investment depends entirely on where you are resident and which wrapper you buy, and only a qualified adviser in your own country can tell you your position. The paragraphs below sketch the shape of the problem so you know what to ask.
The foundational point is structural. A secondary interest is a fund or partnership interest, so the buyer generally inherits the tax profile of the underlying fund. Income and gains flow through and are taxed as the underlying companies are actually sold, not on the discount you captured at purchase. In other words, buying a $100 million portfolio for $94 million does not usually create a taxable “gain” on day one. The discount to NAV is typically not itself a taxable event at acquisition; it is realised over time through distributions and the eventual gain when holdings are sold. That deferral is a feature, but it also means your tax bill arrives on someone else’s schedule, whenever the manager chooses to sell.
The wrapper changes everything about your reporting. Many of the retail products are Luxembourg SICAVs, with CollerEquity and BXPE both using this structure, others such as C-SPEF are US closed-end tender-offer funds, EU retail buyers may hold an ELTIF, a UK investor may hold an LTAF inside an ISA, and the traditional institutional route is a limited partnership. Each of those wrappers produces different tax documents, different withholding treatment and different reporting obligations, and the same underlying strategy can be taxed quite differently depending on which one you hold it through. A UK investor holding a listed trust or an ISA-wrapped LTAF has a very different reporting job from an EU investor in a Luxembourg SICAV. The wrapper decision is partly a tax decision, so it is better settled before buying than after.
The specific items to model with an adviser, wherever you are resident, are three: withholding taxes on distributions, which depend on the fund’s home country and any treaty with yours; transfer taxes on the purchase of the interest itself, which some jurisdictions levy; and the tax residency of the fund vehicle, since a Luxembourg SICAV, an EU ELTIF, a UK LTAF, a US closed-end fund and a Cayman or Delaware limited partnership each interact differently with your home tax system. The discount-to-NAV edge is a pre-tax figure, and how much of it reaches your pocket depends on a wrapper decision most marketing materials gloss over.
X. Case Studies
Three real transactions, two showing the strategy working and one showing where it can go wrong.
New Mountain Capital and Real Chemistry. In April 2025, New Mountain closed a $3.1 billion single-asset continuation vehicle for Real Chemistry, moving one company out of an ageing fund and into a new vehicle so it could keep owning it. The outcome for the original investors was the case for GP-led deals in a single number: about 80 per cent of the original Fund V investors took liquidity at a 4.0x cash-on-cash multiple, while 20 per cent rolled into the continuation vehicle. “4.0x cash-on-cash” means investors got back four times the money they put in. They realised that return without needing a trade sale or a stock-market listing, because the continuation vehicle itself became the exit. That is roughly what a GP-led deal looks like when it works.
Coller Capital’s continuation deals. In the second half of 2025, Coller executed two large manager-led transactions: a $3 billion deal with TPG’s Twin Brook in August and a $2.3 billion deal with Benefit Street Partners in September. What this pair shows is the ordinariness of the scale rather than any single outcome. Billion-dollar-plus liquidity solutions, which would have been landmark events a decade ago, are now routine transactions executed within weeks of each other by a single firm. The growth in the market shows up in exactly that normalisation.
The GP-led conflict. The structural weakness of the manager-led half of the market is that the sponsor sits on both sides of the table. In a GP-led secondary the manager is fiduciary to the selling fund and, at the same time, promoter of the buying continuation vehicle, “setting valuations, selecting which assets move, negotiating fee and carry terms”. The person deciding what the asset is worth, which assets get sold, and on what terms is the same person on both ends of the deal. Regulators have noticed: the US Securities and Exchange Commission has flagged short decision timelines, undisclosed conflicts, information asymmetry and reset carried interest as examination risks, and now requires a fairness or valuation opinion on these deals. The courts have too, and Delaware Chancery litigation has already tested these conflicts. A headline “premium to NAV” in a GP-led deal can disguise a valuation the seller’s own manager set, so when the same party sets the price and takes both sides, the stated price is not a neutral fact and deserves independent scrutiny.
XI. The Core Constraint
The binding limit for secondaries is the discount, and the discount depends on seller desperation, so the real constraint is the supply of motivated sellers relative to the wall of capital hunting them.
Set the two numbers against each other. Dedicated buying capital reached a record $327 billion in 2025, or roughly $477 billion including leverage and traditional investors. Meanwhile less than 5 per cent of the backlog clears each year. There is an enormous backlog of potential supply, but only a thin slice actually comes to market annually, and a growing crowd of buyers competes for that slice. When capital chasing a limited supply of discounted stakes rises faster than the supply, the discount narrows. The edge exists because sellers are motivated, and the risk is that too much money arrives to buy from too few motivated sellers.
This is why pricing has already firmed from around 85 per cent of NAV in 2023 to roughly 90 per cent-plus in 2025. More capital, competing for stakes, bid prices up and discounts down. The constraint is not that the market runs out of assets, since the $3.2 trillion backlog guarantees it will not. The constraint is that the discount, the source of the edge, is competed away when buying power outpaces the supply of willing sellers. What a buyer needs to work out is not whether there is enough to buy, since the backlog guarantees there is, but whether they are still being paid a discount to buy it or the crowd has already bid it away.
XII. Inside the Asset
A single secondary purchase, examined closely, shows what the buyer actually owns.
You are not buying a company. You are buying a claim on a basket of companies you did not choose, valued by a manager you did not hire, at a price set in an auction against buyers you cannot see. When you buy a seasoned fund stake, you acquire in one transaction exposure across multiple vintages, sectors, geographies and managers at once. A single secondary fund position spreads your money over dozens or hundreds of underlying companies bought in different years. That instant diversification is a real structural advantage, and it follows directly from buying a mature, already-assembled portfolio rather than a blank new fund.
The timing profile is the other thing you are buying. Because the portfolio is already built and seasoned, distributions arrive sooner and the early-years fee drag of the J-curve is flattened. A first-time investor in a new fund waits years to see any money back while paying fees the whole time, whereas a secondary buyer steps in partway through, closer to the harvest, and skips the slow, expensive, loss-making early years.
But sitting inside the asset also shows you its dependency. Everything rests on the manager’s NAV being honest. You paid 94 per cent of a number the general partner set. If that number is right, your discount is real. If the manager marked the portfolio optimistically, your “discount” was a fiction and you bought at or above true value. You are, in a real sense, buying a second-hand valuation, and the quality of that valuation sets the quality of your investment. This is why the best buyers spend enormous effort re-underwriting the underlying companies themselves rather than trusting the stated NAV. The number on the label is where your return begins, and what happens to those companies afterwards decides where it ends up.
XIII. The Central Dilemma
The dilemma at the heart of secondaries is that the fastest-growing, most profitable-looking part of the market is also the part with the deepest conflict of interest, and the growth and the conflict tend to come together.
The growth is in GP-led deals. That is the half of the market that jumped from $52 billion in 2023 to $75 billion in 2024 and produced clean 4.0x outcomes like Real Chemistry. It is where managers keep their best companies and give investors a real exit. It is genuinely useful, and it is where the market is expanding fastest.
But GP-led is precisely the structure where the sponsor sits on both sides, setting valuations and choosing which assets move. The manager engineering a transaction with itself is what makes these deals possible and also what makes them dangerous, so the opportunity and the conflict cannot be cleanly separated. LP-led deals, the other half of the market, have far less of this problem, since an arm’s-length seller and an arm’s-length buyer set the price between them, but they are the slower-growing, more competed half where discounts get bid away fastest.
The fork is genuine. LP-led deals give you cleaner, arm’s-length pricing, but they are the slower-growing, most crowded half, where the discount gets bid away fastest. GP-led deals give you the growth and the eye-catching multiples, but the price was set by a party with an interest in setting it high, mitigated but not eliminated by the fairness opinion regulators now require. You cannot get the GP-led growth on LP-led pricing terms, so the real choice is which of those two problems you would rather underwrite.
XIV. The Next Frontier
The clear frontier is the arrival of the individual investor, and it is already reshaping the market’s structure and fee profile.
The fundraising mix shows it clearly. Private wealth made up 22 per cent of Ardian’s record $30 billion fund, double the 11 per cent of its prior fund. The specialist firms have worked out that individuals, in aggregate, are an enormous untapped pool of capital, and they have built products to reach them across every major market: the Luxembourg SICAV evergreens like CollerEquity and BXPE, the US tender-offer funds like C-SPEF, the EU ELTIF 2.0 funds, and the UK LTAF, now eligible for a Stocks and Shares ISA from 6 April 2026. BXPE alone passed $2 billion in assets within a year of its February 2024 launch, driven by wealth managers and high-net-worth buyers. An asset class that required tens of millions and a decade of patience is being repackaged for cheques in the hundreds of thousands with quarterly liquidity, and through the listed trusts, for the price of a single share.
The second frontier is consolidation among the managers themselves. The EQT-Coller combination worth up to $3.7 billion is the visible edge of a wider trend of large diversified managers buying their way into secondaries rather than building from scratch. When the biggest firms in private markets decide the fastest route into a strategy is to acquire an established specialist, they are betting the strategy keeps growing, and each such deal concentrates the market further into a few very large hands.
Both frontiers carry a caution. The evergreen wrapper solves the access problem by adding cost and re-introducing liquidity limits: roughly 5 per cent all-in annual fees and a 5 per cent-of-NAV quarterly redemption gate. The democratisation is real, but it is not free, and the illiquidity the asset class exists to solve reappears at the fund door. The wider access is genuine progress, and it comes with a genuine trade-off.
XV. Lessons From History
The instructive history here is recent rather than centuries old. The last two years contain the market’s clearest lessons in compressed form.
Lesson one: the market is counter-cyclical, and that is its point. The record volumes of $162 billion in 2024 and $240 billion in 2025 did not arrive in a boom. They arrived during the worst distribution drought since 2009. The secondary market grows when the rest of private equity hurts, because pain is what creates sellers. Anyone expecting secondaries to behave like a normal growth asset, rising when times are good, has the mechanism backwards, since the best supply of bargains comes from other people’s distress.
Lesson two: the discount is not permanent. Pricing moved from around 85 per cent of NAV in 2023 to roughly 90 per cent-plus in 2025 as capital flooded in. The edge erodes when money chases it. The discount rewards a buyer for providing liquidity when few others will, and it shrinks once everyone shows up to provide that liquidity. The better entry point is when others are fearful and capital is scarce, not when the strategy is fashionable and $327 billion is competing for stakes.
Lesson three: the valuation is only as good as the valuer. The Delaware Chancery litigation and the SEC’s move to require fairness opinions show a valuation-driven market learning what such markets tend to learn eventually: a price set by someone who benefits from it deserves scrutiny. The regulatory response is young and still evolving, so the buyer’s own diligence, rather than the rulebook, remains the main check on whether a “discount” is real.
XVI. The Case For It
The case for secondaries, stated fairly, rests on four legs.
First, the structural discount. Buyers routinely pay less than the stated value, around 90 per cent of NAV on average and 94 per cent for buyouts in the first half of 2025, which builds a cushion into the entry price. On the worked example, that discount alone produced a 6.4 per cent gross uplift before any company grew a penny. A margin of safety at purchase is a rare and valuable thing in any asset class.
Second, faster money back and a flatter J-curve. Because you buy seasoned portfolios, distributions arrive sooner and the loss-making early years are largely skipped, so you reach the paying-out phase without sitting through the slow early years first.
Third, instant diversification. A single position spreads exposure across many vintages, sectors, geographies and managers at once, the kind of spread that would take a first-time investor years and many separate commitments to build.
Fourth, a durable structural tailwind. The $3.2 to $3.6 trillion backlog of unrealised value, of which less than 5 per cent clears annually, is a supply pipeline that will feed the market for years regardless of any single year’s conditions. The biggest players are committing serious capital on the same view, with the $30 billion Ardian raise, the $22.7 billion Lexington fund and the EQT-Coller combination all betting that this market keeps growing.
XVII. The Risks
The case against is concrete, and every point below can quietly erase the discount the whole strategy is built on.
The discount can vanish. The entire edge rests on buying below NAV, and pricing has already firmed from around 85 per cent of NAV in 2023 to roughly 90 per cent-plus in 2025 as record capital of $327 billion crowded in. Buy into a calm, competitive market and you may be paying close to, or above, full value, with little cushion left.
The valuation you are trusting may be wrong. You pay a percentage of a NAV the manager set. If that mark is optimistic, your discount is imaginary. In GP-led deals the conflict is acute, since the sponsor sets the valuation, selects the assets and takes both sides, which is why the SEC now demands fairness opinions and why these deals have already drawn litigation.
Fees eat the edge. A retail evergreen carrying roughly 5 per cent in all-in annual cost is a headwind that consumes a large share of the discount-driven return every year you hold, which leaves the net return well below the gross figure.
Liquidity is limited, even in the “liquid” wrappers. The 5 per cent-of-NAV quarterly redemption gate on an evergreen means that in a rush for the exits you may be unable to leave when you want. The illiquidity the asset class exists to solve reappears at the fund level. The listed trusts escape the gate but not the pain: they can trade at discounts of 25 to 36 per cent below their own NAV, and that discount can widen against you exactly when you want to sell.
It is counter-cyclical supply, not counter-cyclical value. The market is busiest when the underlying companies are hardest to value and most likely to be marked down. Buying a wave of discounted stakes during a downturn can mean buying into portfolios whose NAVs are about to fall. The discount and the falling value can arrive together.
XVIII. The Alternative Fortune Verdict
Private equity secondaries are a real market solving a real problem, and the problem is not going away. Private equity commits investors for a decade with no natural exit, and when the exit door jams, as it did through the distribution drought that pushed 2023 to its lowest payout since 2009, the secondary market is the pressure valve. That function is durable, the $3.2 to $3.6 trillion backlog guarantees supply for years, and the structural advantages of a discount at entry, faster cash back and instant diversification are real rather than marketing. It is a legitimate corner of private markets that has earned its place.
The edge is nonetheless under pressure, and the wrapper is where investors get hurt. The discount that justifies the whole strategy has narrowed as record capital has crowded in, and in the retail products a roughly 5 per cent annual cost can quietly consume most of the remaining advantage. The strategy itself is sound, but the price you pay to access it, in both discount forgone and fees paid, decides how much of that soundness reaches you.
Where the edge actually is. The edge does not come from the asset class as a category. It comes from buying when others are fearful and capital is scarce, because that is when the discount is real; from the quality of the buyer’s own re-underwriting of the underlying NAV, because the stated value is only as honest as the manager who set it; and from the fee-and-liquidity terms of the wrapper you choose, because a great strategy inside an expensive, gated vehicle turns into a mediocre investment. Discipline on entry price, scrutiny of the valuation, and cost of access are what produce the return, rather than the label “secondaries”.
Questions to ask, by vehicle:
- Institutional closed-end fund (Ardian, Lexington, Blackstone Strategic Partners, Coller): What is the blended discount to NAV the fund is currently paying, and how has it moved as capital has flooded in? What share is LP-led versus GP-led, and how does the manager handle the conflict on GP-led deals? What are the full fees including carried interest, and how long is my money locked up?
- Retail evergreen (SICAV, ELTIF or LTAF) (CollerEquity, BXPE, Hamilton Lane ELTIF, UK LTAFs): What is the true all-in annual cost, and is it near the ~5 per cent seen on comparable products? What exactly are the redemption terms, and what happens if the quarterly gate is hit in a rush for the exits? Is this a pure secondaries strategy or a blend of directs, primaries and secondaries? How is the wrapper taxed and reported where I am resident, and if it is a UK LTAF, can I hold it in an ISA?
- London-listed investment trust (HVPE, ICGT, PIN): What is the current discount to NAV, and is the board doing anything (buybacks, tenders, distributions) to close it? How much of the portfolio is actually secondaries versus primaries and co-investments? What are the total fees, counting both the trust charge and the underlying fund fees?
- US closed-end tender-offer fund (C-SPEF, a route that is largely US-only): How often, and on what terms, can I actually redeem through the tender-offer mechanism? What is the current NAV and fund size, and what are the total fees? How does the US fund structure interact with my home tax system?
Taken as a whole, secondaries are a sound, growing strategy whose advantage is real but eroding, wrapped in vehicles whose cost and liquidity terms vary enormously. The asset class deserves a serious look, and the specific vehicle you buy it through deserves a harder one.
For the wider context on how this fits alongside other ways into private companies, see the pillar guide to private equity.
