Secondaries in 2025: Capitalizing on Structural Momentum
The Private secondary market, where limited partners (LPs) and general partners (GPs) buy and sell existing assets or shares of funds from other LPs and GPs, is continuing its robust expansion in 2025, following its record-breaking year in 2024. It saw unprecedented transaction volume in 2024, reaching a record $162 billion, and multiple sources project it to surpass $175 billion in 2025.
The market's continued growth is driven by various elements such as increased portfolio management and liquidity demands from LPs and GPs, decreasing spread between buyer and seller price expectations, and a broadening investor universe that saw a surge in retail evergreen capital.
Another Record-Breaking Year for the Secondary Market
Source: LPL Research, Jefferies 05/06/2025
Disclosures: Past performance is no guarantee of future results.
What’s Driving the Market
- Transaction Volume on the Rise. Both LP-led and GP-led deals are expected to keep their strong momentum. One notable trend was that more LP sellers came into the market for portfolio management reasons (51% in 2024 vs. 38% in 2023, according to Jefferies) than purely liquidity-driven needs (33% in 2024 vs. 44% in 2023, according to Jefferies). This marks a shift from previous years, when liquidity was the primary driver for LP sellers who faced smaller and slower distributions from primary funds. This also illustrates the evolving use of the secondary market, which can translate into steady demand regardless of the market cycle. GP-led deals, particularly continuation funds, are also getting traction as GPs look to hold onto their high-potential assets while providing liquidity to their current investors.
- Narrowing Bid-Ask Spread. Buyers and sellers are starting to see eye-to-eye on valuations, which means deals are happening more smoothly and more often. This better understanding of what assets are worth is making the transaction process much more efficient.
- Secondary Market as a Standalone Strategy. The secondary market is no longer just a backup plan for LPs and GPs. Both LPs and GPs are using these transactions more and more as a core portion of their portfolios. The secondary market’s potential benefits — such as J-curve mitigation (i.e., reducing the initial negative return period primary funds experience while deploying committed capital), discounted pricing that could enhance returns, position transparency, and exposure to broadly diversified positions in vintages, sectors, and strategies — are well-appreciated by secondary market participants. The growing presence of specialized secondary funds and dedicated buyers signifies the maturity and attractiveness of this market segment, providing sellers with more options and driving market efficiency.
Growing Interest from Diverse Investor Base. The secondary market is not just for institutional investors anymore. It is attracting interest from a wider range of players, including sovereign wealth funds, family offices, and even retail investors who can now gain exposure through semi-liquid investment vehicles.
Conclusion
With a historic high level of committed capital, valuations for high-quality assets/portfolios have moved up and a potential uptick in mergers and acquisitions (M&A) and initial public offering (IPO) exits could bring the competition higher. That said, we believe the structural momentum in the secondary market should continue and may mature into a standalone strategy by scale, sophistication, and strategic relevance. It is no longer just a niche segment of the investment ecosystem (i.e., a place for distressed sellers or liquidity-constrained investors). Instead, it has become a core, forward-looking strategy for both LPs and GPs. The LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) remains structurally positive on the secondary market.
Important Disclosures
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