Secondaries is the market in which investors buy and sell existing stakes in private equity, venture, or credit funds before those funds have finished returning capital, rather than waiting for the fund to sell its holdings and distribute cash.
In plain terms
A private fund is normally a ten-to-thirteen-year commitment: you put money in, and you get it back only as the manager sells its holdings over the following decade. Secondaries exist because life doesn’t wait a decade. A pension fund rebalancing its portfolio, an endowment that overcommitted, or a general partner holding a prized company past the point its original fund can keep owning it can all sell the position — to a secondary buyer, at a negotiated price — rather than wait for the original timeline to play out.
How it works
There are two structures. An LP-led secondary is the simpler one: a limited partner sells its stake in a fund to another investor, who steps into the same partnership on the same terms, usually at a discount to the fund’s reported TVPI to compensate the buyer for illiquidity and the time until the underlying holdings are actually sold.
A GP-led secondary is initiated by the fund’s own manager rather than an investor, most often structured as a continuation fund: the GP moves one or more prized holdings out of an aging fund and into a new vehicle, giving existing LPs the choice to cash out at the negotiated price or roll their stake into the new fund for continued exposure. Because the general partner is effectively on both sides of that transaction — selling an asset it manages to a vehicle it will also manage — GP-led deals carry a structural conflict of interest that LP-led ones don’t. Independent fairness opinions and LP advisory committee sign-off are now standard market practice on most GP-led deals, even though the SEC rule that would have made a fairness or valuation opinion a federal requirement for adviser-led secondaries was vacated by the courts in 2024.
Buyers are specialized secondary funds — firms like Lexington Partners, Ardian, and HarbourVest raise capital for the specific purpose of buying existing stakes — and the pricing discount reflects both the illiquidity of the position and the buyer’s own diligence on assets they didn’t originally select.
The numbers
- Global secondary market volume, full-year 2025: $240 billion, up 48% year over year and the largest year on record, per Jefferies’ Global Secondary Market Review.
- LP-led share of 2025 volume: $125 billion, roughly 52% of the total.
- GP-led share of 2025 volume: $115 billion, roughly 48% of the total — up from a market that was almost entirely LP-led a decade earlier.
- Typical discount: LP-led stakes commonly trade at a discount to the fund’s most recently reported net asset value, though pricing varies widely by fund quality, vintage, and market conditions.
What people get wrong
That selling a fund stake on the secondary market is a sign of distress. For most sellers it’s portfolio management, not trouble: large institutional LPs run systematic secondary-sale programs every year simply to manage pacing and liquidity across a portfolio with dozens of funds at different stages, the same way a household might rebalance a 401(k). The more consequential misconception runs the other way, toward GP-leds: an LP asked to approve a continuation fund is being asked to evaluate a deal where their own fund manager set the price, selected the asset, and will run the buyer — which is exactly why the “status quo” option (declining to roll, taking cash instead) exists on every GP-led deal, yet many LPs default into rolling without pricing the alternative.
Related
Read more: Alternative Assets: Investing Beyond Stocks and Bonds · Hedge Funds and Private Equity: The Other Engine of Modern Finance Wealth
See also: Continuation fund · Vintage year · DPI, TVPI, and IRR