Private Equity Secondaries Continue to Demand Attention from Institutional Investors
January 22, 2026
The lack of liquidity in private equity (PE) portfolios over the past 12-18 months has been well documented. There have been several contributing factors, including the 2024 presidential election, tariff concerns, interest rate uncertainty, wide bid-ask spreads between buyers and sellers and limited demand for businesses not considered to be “A” assets or companies lacking an artificial intelligence (AI) story. While sponsors, venture capitalists and other private-market investors look to return capital to investors in 2026, the secondaries market has continued to grow, offering limited partners (LPs) a “secondary” avenue for liquidity.
As seen in today’s Chart of the Week, the secondaries market has grown significantly, from roughly $100 billion in assets under management (AUM) in 2010 to over $500 billion at the end of 2024 (data available up until March 2025).1 Why are secondaries receiving so much attention, and how is this newer asset class attractive to investors? There are a few reasons, including maturity and broader knowledge of the strategy, flexibility, a shorter path to liquidity and reduced J-curve effects, access to seasoned assets, as well as relatively consistent performance.2
First, secondaries began to take shape more institutionally around the year 2000.3 Given the asset class’s maturity and positive attributes, more allocators are realizing the potential benefits a secondaries strategy can provide to a diversified portfolio. This dynamic is demonstrated above as secondaries’ share of private equity AUM has nearly tripled since 2000, with momentum accelerating further since the pandemic.4
Second, the flexibility with which secondaries investors can structure their investments to maximize the discount at entry, the period during which the portfolio is funded and the assets they ultimately want to purchase contribute to the strategy’s appeal. Investors can also purchase preferred equity tranches, tender offers and hybrid strip sales, blending primary and secondary capital.5
Third, given secondaries investors are typically purchasing portfolios that are mostly invested, LPs gain access to seasoned assets that are through the majority of the “value creation” period and closer to a liquidity event. Some secondaries investors also frontload their funds through LP-led transactions, thereby reducing or limiting the J-curve and returning capital to investors more quickly. This attribute of the strategy can also help allocators forecast cash flows and budget more effectively, leading to increased appetite for the strategy.
Fourth, secondaries funds may provide relatively consistent performance due to accelerated distributions, insights into the underlying assets of the portfolios, knowledge of the underlying general partners or fund investors, as well as diversification across fund vintages, sectors and geographies. While a secondaries fund may not provide the upside that an early-stage venture capital fund might, the band of outcomes for secondaries performance is much tighter. For some allocators, they may be more appropriate for their investment program or strategy.
Finally, secondaries funds can only purchase portfolios when sellers are available. As mentioned earlier, given the lack of liquidity across the broader PE market, many LPs have been looking to generate cash and, as a means of doing so quickly, have turned to the secondary market. Secondaries offer a faster route to liquidity, provide certainty of closing and efficient pricing. Sellers of assets will normally have to sell their holdings at a discount, which varies depending on the type of strategies the LP is invested in, but given the need for cash, this is sometimes necessary.
Key Takeaway
The lack of exits across the broader PE market has created challenges for some allocators and LPs that need cash. Many are now turning to the secondary market to sell what LPs consider non-core holdings or other assets that may not be critical to their go-forward investment strategy. This has been a boon to secondary capital raising and to the asset class's broader popularity.
Given the attributes of secondaries mentioned above, as well as the ongoing liquidity needs of investors, I expect secondaries to remain a popular avenue for allocators looking to right-size their portfolios. For secondaries fund investors, I expect performance to continue to be attractive with regard to a diversified portfolio, as secondaries funds, with a mix of LP-led and general partner-led transactions, provide earlier distributions and upside in single asset transactions, leading to overall attractive risk/reward scenarios.
Sources:
1Preqin
2-5CVC Capital Partners – Secondaries in the Spotlight; 11/26/25
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