The Rise of the Secondary Market: How Investors Are Selling Private Equity Without Waiting 10 Years

A Shift in Private Markets

Private equity has long been defined by long investment horizons and limited liquidity. Traditionally, investing in a private equity fund meant committing capital for eight to twelve years, with investors waiting for managers to sell underlying companies through exits such as mergers, acquisitions or public listings. For many institutional and middle-market investors, this illiquidity was an accepted trade-off for enhanced returns and uncorrelated performance relative to public equities.

In recent years, however, a transformative trend has reshaped this paradigm. The private equity secondary market, where investors buy and sell existing stakes in private capital funds, has evolved from a niche solution into a core pillar of modern private markets. This shift allows investors to unlock liquidity well before traditional exit events, fundamentally altering how portfolios are managed.

What Are Secondaries?

At its core, the private equity secondary market allows an existing investor in a fund, typically a limited partner (LP), to sell their interest to another investor. This contrasts with the primary private equity market, where investors commit capital to a fund at inception. By purchasing a stake in an existing fund, a secondary buyer steps into the position of the seller, taking over the remaining capital commitments and rights to future distributions. This transaction provides the seller with immediate liquidity instead of waiting for the fund to fully liquidate its underlying assets.

Secondary transactions have expanded rapidly in recent years, driven by the increasing need for liquidity, portfolio rebalancing and strategic flexibility. Global secondary market volume reached record levels in 2024 and continued strong momentum into 2025, reflecting both heightened investor demand and deeper capital pools dedicated to secondaries.

Why Secondaries Matter Now

Several structural and market forces have contributed to the growth of the secondary market.

First, private equity exit activity has slowed. The combination of higher interest rates, geopolitical uncertainty, and weaker public listing markets has made it more challenging for fund managers to sell portfolio companies at attractive valuations. This has delayed distributions to investors, extending holding periods beyond initial expectations.

Second, investors across the spectrum, from pension plans to insurance companies and family offices, seek ways to manage their allocations proactively. Selling stakes in funds allows these investors to rebalance portfolios, adjust exposure to specific vintages or strategies, and meet cash flow needs without depending on a traditional exit from a fund’s underlying assets.

Third, the secondaries market itself has matured. Dedicated funds that specialise in acquiring existing private equity interests have grown substantially. These funds attract significant capital because they can access more seasoned assets with shorter remaining durations and clearer visibility on performance compared with committing to new funds. This expanded buyer base has supported robust pricing and improved liquidity conditions.

Continuation Vehicles: A New Secondary Pathway

Alongside traditional LP-led secondary sales, continuation vehicles have emerged as a prominent structure within the secondary landscape. Continuation vehicles, sometimes called GP-led secondaries, allow private equity managers (GPs) to transfer one or more assets from an older fund to a new vehicle. Existing investors can choose to cash out or roll their investment into the new vehicle, often alongside new or specialised secondary capital.

This structure serves two important functions. For the manager, it offers flexibility to continue holding a high-performing asset where significant value creation is still anticipated, without the constraints of the original fund’s lifecycle. For the investor, it provides a choice: exit with liquidity or maintain exposure to attractive opportunities. Continuation vehicles, therefore, create a hybrid solution, balancing the need for liquidity with the desire for long-term returns.

Continuation structures have become an increasingly significant part of the secondaries market, representing a growing share of secondary transactions and attracting substantial dedicated capital. This reflects both investor appetite and the broader market’s recognition of the value inherent in more mature assets.

Source: Evercore, 2025 Secondary Market Highlights.

The evolution of continuation vehicles is reflected in the changing composition of secondary market activity over time. While LP-led transactions have historically accounted for the majority of secondary volume, GP-led transactions have grown materially over the past decade. In 2016, GP-led activity represented less than half of LP-led volume (€9bn compared with €22bn). By 2021, GP-led transactions had reached near parity with LP-led activity, and by 2025, both channels are estimated to exceed €90bn annually. This convergence illustrates a broader structural shift within private markets: secondary liquidity is no longer confined to portfolio rebalancing by limited partners, but has become an established capital management mechanism utilised by general partners as well. The expansion of GP-led solutions reflects the increasing flexibility with which private equity assets are structured, financed and held over time.

Reframing Private Equity Liquidity

For middle-market investors, the growth of the secondary market has important implications. It redefines how investors think about liquidity in what has historically been a long-dated, illiquid asset class. Secondaries provide a mechanism to manage risk more dynamically, balancing long-term commitments with near-term needs. They also offer access to more mature portfolios, reducing the uncertainty that comes with early-stage commitments in new funds.

From a risk-reward perspective, secondary investments often trade at some discount to net asset value, reflecting transaction costs, illiquidity and information asymmetry. These discounts can provide upside potential if the underlying assets perform well over time. However, buyers must exercise rigorous due diligence, particularly as secondary transactions can involve complex valuation and governance considerations.

Importantly, the evolving secondary market underscores the importance of understanding both the opportunities and trade-offs inherent in private capital investing. Liquidity mechanisms such as traditional secondary sales and continuation vehicles enhance flexibility, but they do not eliminate the fundamental long-term nature of private equity.

Looking Ahead

The secondary market represents a maturation of private capital markets. It is not a signal that traditional private equity has failed, but rather that the asset class has reached a level of depth and sophistication where liquidity options are more varied and responsive to investor needs. For middle-market investors, appreciating these dynamics is essential to making informed allocation decisions and constructing resilient portfolios.

Private equity remains a compelling long-term strategy. Today, secondaries enrich that strategy with pragmatic avenues to manage risk, optimise timing and align investment horizons with broader financial objectives.