Private markets secondary sales – the transfer of existing stakes in private-capital funds or portfolio companies from one investor to another – have surged to record levels in recent years, and are seen as a go-to option for those looking to unlock the value within their assets.

Secondary markets are no longer niche products or fallback options, but have become a mainstream liquidity and portfolio optimisation tool for investors in private equity, private credit and other private asset classes.

In private markets, secondary sales or “secondaries” refer to the sale of existing positions in private equity funds, direct company stakes, interests in private credit, real estate, or infrastructure vehicles from one investor (usually a limited partner – an LP) to another investor (often secondary funds or other LPs).

These can be split down the middle as either LP-led, where they sell their existing limited partnership interests to a buyer before the fund is wound up or the assets disposed of by selling, scrapping or donating them.

They can be General Partner-led, where General Partners (GPs) arrange continuation vehicles (CVs) to accommodate the movement of assets from an older fund into a new vehicle. This offers existing LPs the option to sell or roll them on. GP-led deals into CVs means they can retain high-tracking assets while providing liquidity to existing investors.

The process itself, while appealing, can be intricate, and investors and fund managers often encounter various issues before capital is placed.

Common issues with secondaries can be:

• Sluggish traditional exits such as IPOs and M&As, which disrupt the flow of funds to investors.
• Liquidity needs from LPs and GPs alike, with longer holding periods and slow distributions.
• Greater acceptance of continuation vehicles and GP-led structures.
• Growing capital dedicated to secondaries strategies, in their own right.
• Evolving portfolio management tools and risk management procedures.

There are some principal drivers as to why secondaries have fallen in and out of favour across time.

There has been less traditional liquidity, as IPOs and M&As have slowed down. These exit pathways have been constrained by macroeconomic volatility and prolonged downturns in public markets, which resulted in fewer exits and delayed cash distributions back to LPs.

In 2025, global IPO markets remained historically subdued, especially in Europe, diverting companies away from public exits. M&A, on the other hand, has seen deal sizes muted and valuations challenging, leaving many private equity firms unable to achieve their desired exits through the usual sale processes. This has resulted in investors seeking alternative liquidity options, with secondaries filling the gap.

The needs of investors have also increased, with institutional investors (pension funds, endowments, sovereign wealth funds) facing internal pressures for liquidity or rebalancing. Here, LP secondary sales provide immediate cash rather than waiting years for fund wind-ups. Some institutions have actively reduced their private equity allocations amid budget pressures. The Yale endowment selling some of its PE stakes is a prime example.

Overall, according to BlackRock, LP secondary volume in 2024 was some $87bn, forming a majority share of total secondary transactions.

GP-led secondaries, and particularly continuation vehicles, have become a dominant structural tool, where firms have used CVs to extend ownership of high-conviction assets while offering LPs liquidity. These continuation vehicles comprised up to 20% of all PE sales in 2025, according to the Financial Times. It is understood that GP-led volumes now exceed $75bn and are a record segment of the secondary market, which is a reflection of how private equity firms manage portfolio company lifecycles.

There has been an increase in buyer appetite and capital dedicated to secondaries, as secondary funds and providers have amassed significant “dry powder” (committed but uninvested capital), indicating strong demand to purchase secondary stakes. Dedicated capital for secondary transactions, as we have seen, has reached an all-time high in 2025. Meanwhile, new structures such as evergreen vehicles and retail vehicles have expanded investor participation, and have taken on a “FOMO” gravitas for some investors.

While competition increases, buyers are more willing to pay close to net asset value (NAV), depending on the fund’s structure. This stronger demand is driving higher pricing and narrower spreads, making secondary transactions more attractive to sellers and reducing the traditional discount typically applied in secondary sales. This evolution is shown below.

With the evolution of portfolio management tools and risk control processes, secondaries can also provide strategic benefits. This includes portfolio rebalancing and de-risking, where investors can reduce concentration or shift exposures. This broad diversification, as it is so termed, is where buyers gain exposure to mature assets with known performance histories and deeper data and transparency. It means coming to them with better market information and standardised practices, which improves due diligence and pricing clarity.

The secondary market isn’t just limited to private equity. Private Credit secondaries have also gained traction. According to The Wall Street Journal, secondary deals in private credit grew from some $7bn (2022) to $12bn (2024), with further projected increases in 2026. This diversification broadens the appeal of secondaries across asset classes and investor types.

Beyond cyclical market conditions, a number of deeper structural trends are driving the popularity of secondaries.

• Ageing private markets and longer hold periods show that private assets are taking longer to sell in traditional markets. That creates a bottleneck of unrealised assets and heightens the need for intermediate liquidity options.
  
• A shift in LP objectives sees investors now placing more emphasis on distributions to paid-in capital (DPI), that is returning cash rather than just monitoring internal rate of return (IRR). Interestingly, there has been a significant increase in LPs ranking DPI as a priority.
  
• Capital allocation and an evolving approach to portfolio management see secondaries allowing investors to adjust allocations without needing to exit private markets entirely. They can also rotate capital to newer vintages or different strategies more readily.
  
• Regulatory and institutional acceptance now sees regulatory frameworks and institutional standards for secondaries maturing, making these transactions more mainstream and accepted as part of strategic asset allocation.

As with any investment and financial decision, there remain certain pitfalls to overcome and judgement to exercise, but these are not insurmountable with the right steps.

Careful manager selection remains crucial, particularly given the importance of disciplined due diligence and experience across such complex structures. The abundance of capital now targeting secondaries has also introduced pricing pressures that could possibly reduce future returns.

Any GP-led structures and transactions, as observed by the FT, have raised potential conflicts of interest, particularly in valuation and pricing disputes. Also, despite their growth, secondary markets continue to represent a relatively small proportion of total private market assets, accounting for less than 5% of volume. Meanwhile, the technical and legal complexity of these transactions can deter accessibility for less experienced investors.

Secondary sales in private markets are in renewed and expanding demand due to a confluence of liquidity needs, slower traditional exit channels, institutional pressures and a progression in private asset investing.

For sellers, this means access to liquidity without waiting for fund wind-ups or IPOs, and is a chance to rebalance portfolios and allocate to newer strategies with better pricing and improved transaction terms.

For buyers, it is a chance to acquire mature, diversified assets with clearer cash-flow and risk profiles, and the potential for attractive returns plus expanded opportunities in private credit and other adjacent markets.

From a strategy once considered a fallback option, private market secondaries have transitioned into a core liquidity management tool, evidenced by record volumes, tightened pricing and broader adoption across LPs, GPs and even retail channels.

With continued innovation in structures and growing capital dedicated to secondaries, this market segment is poised for further growth as a fundamental part of private capital continues to change and evolve across time.

At Arbra Partners, we can help guide you through the choices related to the intricate landscape that surrounds private markets and beyond. Our expertise is on hand to ensure that you can make the best decisions about where to place and reallocate your capital in order for you to realise the growth ambitions of the future.