The private equity secondary market has started 2025 on the same high note with which it closed 2024.
About $45 billion of deals were executed in Q1 2025, according to the PJT Q1 2025 Secondary Market Insight report, accessed by Secondaries Investor, an intelligence firm focusing on the private equity secondaries market. This was a 45% year-on-year (YoY) growth from what was obtained in Q1, 2024.
With the secondaries market for private equity recording $162 billion in transaction activity in 2024 (a record-breaking figure), it is no wonder that analysts are positive about its trajectory in 2025. Transaction volumes are expected to exceed $200 billion in 2025, according to industry players who gathered at the PEI Group’s Nexus Conference in March.
“The robust momentum from 2024 has established a strong foundation for sustained growth in secondary deal-making,” according to BlackRock. “As new market participants adopt proactive portfolio management strategies, record-setting milestones are likely to continue.”
However, not many are as optimistic, especially given the economic uncertainty and market volatility introduced by Trump’s economic policies.
In this article, we will consider the trends that are defining the private equity secondary market, where the opportunities lie for asset owners and asset managers, and what the future holds:
- Current trends defining the private equity secondary market
- Exploring the private equity secondaries market: Where the opportunities lie
- The future of the secondary market for private equity
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1. Current trends defining the private equity secondary market
While the overall private equity secondary market has been growing since 2024, certain trends have defined this growth. We consider some of the most important ones below:
GP-led and LP-led deals fight for domination
General partner-led (GP-led) and limited partner-led (LP-led) deals continue to battle it out for domination of the secondaries market.
The data from Secondaries Investor reveals that $25 billion of the $45 billion transacted in Q1 2025 was GP-led.
If this trend continues, we may expect to see a reversal of the pattern established from 2022 – LP-led transactions dominating GP-led transactions, as the chart below shows.
GP-led and LP-led Deals, 2020-2024
Source: BlackRock
Why LP-led deals dominated in 2024
“LP-led transactions have historically represented more than 50% of the market, and this trend continued in 2024, with LP-led deals accounting for 54% of the market,” according to BlackRock.
The dominance of LP-led deals in 2024 is due to limited partners seeking to meet their portfolio diversification (the need to reduce portfolio risk) and liquidity (the need to generate cash from their illiquid PE investments) needs, given capital constraints and slower distributions from general partners (sponsors, fund managers), according to CAIS Group, a fintech company improving access to alternative assets.
Also, they noted, based on a survey by Lazard, an asset management firm, that portfolio management needs (51% of LPs in 2024) dominated liquidity needs (33% of LPs in 2024) for LPs. Thus, since the need for portfolio diversification remains, they expect more LPs to enter the secondaries market. “As the market for secondaries evolves and expands, GPs and LPs alike are turning to these transactions more systematically,” they said.
Why GP-led deals are making a comeback
A look at the chart from BlackRock shows that GP-led deals once dominated the secondary market for private equity (2020 and 2021).
Thus, the recent outperformance in Q1 2025 may be the beginning of a comeback rather than a fresh reality out of nowhere.
But what is driving the increased adoption of GP-led private equity secondary market transactions?
“This new high (referring to GP-led deals making a new ATH in 2024) was driven by several factors, including continued sponsor adoption, the entry of new market participants, improving capital markets, and the continued rise of evergreen vehicles,” according to BlackRock.
Also, though the relative market share of buyout transactions declined, they remained the most dominant GP-led strategy in the private equity secondaries market in 2024, according to Lazard.
GP-Led Private Equity Secondary Transactions By Strategy, 2022-2024
Source: Lazard
Buyouts, especially through continuation vehicles, continue to dominate in Q1 2025, according to Secondaries Investor, but more about that in a bit.
Higher perceived value of underlying assets and attractive pricing
One of the trends that has increased demand-side interest in the private equity secondary market is that secondary buyers have been willing to offer attractive prices for assets on sale. Many are even buying at more than 90% of the fund’s net asset value (an investment fund’s assets minus its liabilities).
“For buyout portfolios, which made up 70% of LP-led volume, pricing increased to 94% of net asset value (NAV) (+300bps YoY),” according to BlackRock. “In the adjacent markets, credit portfolios saw a remarkable boost to 91% of NAV (+1400bps YoY) - and venture/growth portfolios ticked up to 75% of NAV (+700bps YoY).”
LP-led Market Pricing as a % of Net Asset Value (NAV), 2020-2024
Source: BlackRock
In other words, buyers are willing to enjoy less discount on the private equity funds they are purchasing in the LP-led side of the secondary market. (The same trend holds, to a lesser extent, for the portfolio companies they are buying in the GP-led market.)
Four factors are driving this trend, according to CAIS Group:
- High supply of capital and demand for assets: Dry powder and near-term fundraising rose as high as $288 billion at the end of 2024, according to Jeffries, an investment banking firm. Given that many buyers were competing in the market, prices had to rise, which meant a lower discount on NAV.
- Stable macroeconomic environment: The interest rate cuts in H2 2024 and the rise of public markets led to more confidence in PE-backed companies. This also contributed to the high supply of capital and demand for assets in the market.
- Focus on younger vintages: They also noted that the average age of secondary funds fell to 6.6 years in 2024, the youngest it has ever been. Lower age means that these assets have more headroom to provide value to investors (more outstanding years in their life cycle), thus, the willingness to pay a higher price for them.
More mature, higher-quality assets: Buyers are focusing on mature and high-quality assets for their private equity portfolios. One advantage of this is that it mitigates the J-curve effect (private equity funds posting negative returns in the early years). Since these assets are mature, their returns are likely positive already, and distributions can occur more quickly.
Single-asset continuation funds keep dominating
Secondaries Investor mentioned that sponsors continue to see continuation vehicles (CVs) as a reliable exit strategy in Q1 2025. Of the 23 CVs that were reported during this period, 11 were closed.
Number of closed CV funds, January 2024 to March 2025
Source: Secondaries Investor
Also, single-asset continuation vehicles continue to dominate multi-asset continuation vehicles, though the gap narrowed in Q1 2025.
Number of Closed CVs, Single Asset vs Multi Asset, January 2024 to March 2025
Source: Secondaries Investor
The historical data provided by Lazard reveals that single-asset CVs have dominated since at least 2021.
Capital Deployment in GP-led Deals by Transaction Type
Source: Lazard
This dominance can be attributed to high-quality assets, strong GP alignment (with investors), and sector concentration (desire to get exposure to a certain sector), according to BlackRock.
The quality of the assets can be seen, for example, in the fact that 87% of single-asset CVs were priced at 90% or more of their NAV, according to Lazard. Only 71% of multi-asset CVs achieved the same pricing level.
Regarding sector concentration, investors continue to prioritise technology, healthcare, business services, and industrials, as seen in the chart below:
Investments in Single-Asset Continuation Funds by Industry
Source: Lazard
Growing importance of retail capital
Retail capital is now challenging the domination of the private equity secondaries market by institutional investors like pension funds, insurance companies, and sovereign wealth funds, among others.
These retail investors access the market through semi-liquid vehicles like the ’40 Act, ELTIF, and LTAF.
About a third of the funds deployed in the secondary market for private equity in 2024 came from retail capital, according to BlackRock.
Though these investors have traditionally focused on LP-led deals, interest in GP-led deals is rising. Similarly, the need to diversify cash flow profiles has led them to an investment strategy that favours multi-asset CVs over single-asset CVs.
Lazard is confident that retail capital will be one of the key drivers of the secondary market in 2025.
“A surge in GP-led and LP-led deals is forecasted to persist in 2025, propelled by record capital raising activity, including traditional investors, new entrants, and retail investors,” they said. “Capital inflows from retail investors continue to accelerate, fueling a rise in ’40 Act fund AUM with new vehicles continually coming online.”
2. Exploring the private equity secondaries market: Where the opportunities lie
In considering the opportunities you can explore as an asset owner or asset manager, our focus will be on both the trends defining the secondary market and current trends in the larger economy (fiscal and monetary policy uncertainty as well as public markets volatility arising from Trump’s tariffs).
So, what opportunities are available for asset owners and asset managers considering private equity secondaries investments?
More quality assets/funds on offer
We have already seen that the quality of private equity investment funds and assets on offer in the secondaries market is rising.
Economic uncertainty is likely to accelerate this trend.
“In the near term, we expect ongoing market dislocation to drive more motivated sellers in the secondary market, which should improve sourcing opportunities,” according to Northleaf Capital, a private market investment firm. “At the same time, we are likely to see heightened due diligence as buyers navigate market uncertainty.”
In other words, uncertainty will increase the desire to exit the market from the sellers’ side and the focus on high-quality assets on the buyers’ side (“if we are buying in this economy, it better be worth it”).
Pricing will depend more on the quality and age of assets
CAIS Group identified high demand as a key reason for the lower discount on the prices of assets and funds in the secondary market. However, with uncertainty in the general economy, demand may reduce, leading to a lower supply of capital.
Thus, price will depend primarily on the quality and age of assets. Sellers who can offer high-quality assets and younger vintages are more likely to benefit from attractive pricing. “Secondary sellers bringing higher-quality assets and newer fund vintages to market are more likely to retain their value,” according to Northleaf Capital.
Uncertainty provides a chance to earn higher returns
Private equity secondaries usually outperform public markets. However, the gap tends to expand during economic recessions.
The chart below compares the returns of private equity secondaries with the MSCI ACWI Index (a global equity index which covers 85% of the global investable equity market).
Returns of Private Secondaries vs Public Markets, 2006-2024
Source: Northleaf Capital
As seen above, the gap between the returns widened during both the 2008 financial crisis and the COVID-19 recession.
“Liquidity constraints in private equity and elevated market volatility are expected to be strong tailwinds for growth in the secondaries market,” according to Northleaf Capital. “Strong returns amid market uncertainty have positioned secondaries as one of the fastest-growing and most innovative segments in private markets.”
Thus, even if the fears of a US and global recession materialise, investors in the private secondaries can expect larger outperformance of public markets.
Diversification across strategies is key
While acknowledging that the private equity secondaries market can provide alpha in uncertain markets, Schroders Capital mentioned that investors must also pay attention to risk.
Though secondary funds mitigate the blind pool risk associated with primary investments, other risks exist (capital loss due to poor performance of underlying portfolio companies, holding on to an illiquid asset or a portfolio of assets), and strategies differ by risk/return profiles.
Thus, diversification will be key.
To that effect, they provide five asset allocation suggestions for those interested in private equity secondaries market investments:
- Focus on where there is a balance between supply and demand dynamics to get a favourable entry valuation and yield.
- Include domestic assets and companies to hedge against geopolitical risks and trade conflicts.
- Focus on opportunities to earn additional risk premiums due to market inefficiencies, complexity, innovation, and transformation.
- Use limited leverage or asset backing for robust downside protection.
- Ensure reduced correlation with public markets.
Prioritise small and mid-sized buyouts
We have already seen that most secondary transactions are buyouts.
Nothing much has or will change in this regard.
However, Schroders Capital advises that buyers should prioritise small and mid-sized buyouts, given that they are less susceptible to geopolitical uncertainty than the larger ones.
“In private equity, we see small and mid-sized buyout investments – accessed through primary fund investments, direct/co-investments and GP-led secondaries – to be attractively priced and less affected by geopolitical and trade conflicts, compared to large-cap buyouts,” they said.
This is because small and mid-sized buyouts involve smaller local or regional private companies that are not too reliant on the international supply chain or bogged down by too many regulations.
3. The future of the secondary market for private equity
The broader economic uncertainty has caused private equity exit activity to slow down. Mergers and Acquisitions (M&As) face new challenges, and IPOs are either being put on hold or their timelines reassessed, according to Moonfare, a digital investment platform targeting private equity and venture capital.
When traditional exit routes become challenging (a common problem with this investment vehicle and other alternative investments), pre-existing investors (also known as primary investors) turn to secondary sales to meet their liquidity needs.
Furthermore, we have seen that portfolio diversification is a more common reason why investors seek private equity secondaries investments. Since portfolio diversification becomes increasingly essential amidst economic and market uncertainty, secondaries can only be expected to thrive.
Moonfare agrees:
“We believe it (secondary market) acts as a vital liquidity valve, allowing GPs to return capital and LPs to manage their portfolios more proactively,” they said. “For buyers, this presents a unique opportunity to access established private equity investments, while potentially benefiting from attractive pricing dynamics influenced by broader market volatility and sentiment.”
What do they conclude?
“In an environment demanding caution, like today’s, we think secondaries may present one of the most compelling private markets strategies going.”
BlackRock shares the same optimism:
“Records are likely to continue to be set as larger and more diversified portfolios come to market,” they said. “Further, adjacent verticals, including venture/growth, credit, and infrastructure, are also expected to gain momentum due to favourable pricing dynamics in recent quarters.”
Asset managers and asset owners who want to participate in this future should explore the opportunities we have covered, even as they stay on top of the latest trends in the private secondaries market to identify fresh opportunities.
One way to keep a tab on the latest trends is to belong to a community of other asset managers, asset owners, and investment experts who share relevant updates.
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Takeaways
- Private equity secondaries market transactions reached an ATH in 2024. The same growth trajectory continues in 2025.
- Some of the trends that have defined the market include the growing adoption of GP-led deals, a focus on high-quality private equity assets, attractive pricing, domination of GP-led deals by single-asset CVs, and the growing importance of retail capital.
- Asset managers and owners can explore opportunities in the secondaries market that include more quality assets/funds on offer, attractive pricing for higher-quality assets and younger vintages, outperformance of public markets, diversified strategies, and smaller or mid-sized buyouts.
- As traditional PE exits become harder, the secondaries market will continue to be important.
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