Secondaries prove their resilience in the face of economic unrest

The jury has decided: private equity secondaries are now a bona fide, resilient sub-asset class. Last year was an extraordinary one, achieving a record-breaking transaction volume estimated at $160 billion. This represents a substantial 41% year-over-year increase, surpassing the previous high set in 2021 and solidifying 2024 as the most active year on record for secondaries.

This sustained momentum underscores the market's remarkable capacity for innovation and adaptation, attracting a broader spectrum of participants and offering tailored solutions for liquidity and portfolio management needs.

This trend is not for turning

Far from being a bete noire of GPs a decade or more ago, given their association with forced selling, secondaries are now an integral part of the ecosystem as LPs increasingly use them for tactical portfolio management, while GPs hold on to trophy assets to further extend the value creation process.

“Essentially, both GPs and LPs want the ability to manufacture their own liquidity at the time of their choosing thereby removing them somewhat from fluctuations in the capital and M&A markets. This represents a fundamental shift in the industry and is here to stay,” says Sanjay Gupta, CIO, Moonfare.

Part of the reason for the growth in secondaries is a function of stress in primary markets which have more directly felt the impact of economic uncertainty. For many GPs, the last few years have been a challenging stretch.

Yet despite reduced exit activity, diminished distributions to limited partners and a generally tougher fundraising environment, institutional investors continue to believe that private equity remains a cornerstone asset class, with flexibility and resilience. Neuberger Private Markets has been an active and successful private equity investor since 1987, managing over $140 billion of investor commitments (as of 31 March 2025).

“Over the past three years through December 2024, we have committed over $30 billion of capital across core Private Markets strategies of primary and secondary fund investing and co-investing, and over $19 billion in 2024, inclusive of private credit and specialty strategies,” confirms Philipp Patschkowski, a Managing Director of Neuberger Berman and a member of the Secondary and Strategic Capital Investment Committees.

Duel-pronged expansion

Both LP-led and GP-led segments have contributed to transaction volume growth.

LP-led transactions, comprising 56% of the total volume, were propelled by diverse limited partners, including pension funds, asset managers, and family offices, strategically leveraging the secondary market for portfolio management. In addition, the emergence of '40 Act funds and evergreen vehicles further amplified demand last year, introducing new market dimensions and intensifying competitive dynamics.

GP-led transactions also reached new peaks in 2024.

The increasing adoption of multi-asset and single-asset continuation vehicles (CVs) underscores their efficacy as powerful instruments for re-underwriting high-performing assets, aligning stakeholder interests, and optimising holding periods. Collectively, the expansion of secondary funds with increased cheque sizes, the rapid influx of retail capital and the heightened willingness of primary LPs to directly engage in CVs have fuelled market expansion and contributed to its resliience.

“We see continued support for the sector’s long-term growth, which we expect to be expedited by renewed macroeconomic uncertainty and recent market volatility,” says Patschkowski.

“Historically, we have observed periods of tight liquidity, increased volatility and heightened uncertainty which have created a more compelling opportunity for secondary buyers, and we expect current market conditions and the trends that are present in the market to benefit them. Given the size of the market, increased portfolio management by LPs, and the established GP-led market, we expect the positive impact from the current uncertainty and volatility to be much larger than in prior cycles.”

Price and Quality Prove Attractive

Pricing across the secondary market remains robust, with strategies spanning buyout, credit, infrastructure, and tail-end assets performing at or exceeding historical averages. Moreover, the quality of secondary transactions is also strong. Some institutional investors looking to raise liquidity are restricted by their investment committees on selling at meaningful discounts. As a result, they are offloading their interests in funds they might ordinarily have chosen to hold for longer. This is giving secondary buyers a great opportunity to pick up portfolios of attractive assets, albeit at a limited discount.  

Continued growth is anticipated, driven by strengthening secondary fundraising, persistent demand for liquidity solutions, the expansion of secondary strategies into credit, infrastructure, real estate, and venture capital, and the ongoing adoption of innovative structures in both GP-led and LP-led transactions.

Improved pricing transparency and robust performance data, supported by increased exits, are further cementing the secondary market's pivotal role in sophisticated portfolio management and capital formation.

“For both limited partners and general partners, we believe secondaries are a solution for the private equity market’s constrained liquidity, which we expect to remain lower for longer than many market participants had been anticipating toward the end of 2024. Nonetheless, despite strong secondaries fundraising, the market remains undercapitalised, resulting in relatively attractive pricing, even after the deeper discounts of 2022 to 2023 have narrowed,” observes Patschkowski.

Moonfare has created an evergreen fund focused on both LP-led and GP-led secondary transactions to leverage the favourable economics of this expanding marketplace with Gupta noting that Moonfare is seeing significant pent-up demand from clients for this type of offering.

“On the deal side, there's growing acceptance and interest in secondaries from both GPs and LPs. We view this as a long-term, secular trend, driven not just by the current low DPI environment, but by secular shifts in the market. We expect this momentum to continue as the ~$7 trillion of unrealised value in buyout and venture portfolios moves to a state of semi-liquefaction,” concludes Gupta.

Robust performance and a positive outlook are solidifying the private equity secondary market's position as a vital and increasingly sophisticated component of the broader private capital landscape. In effect, secondaries have become the Swiss Army knife of portfolio management, making private equity an increasingly tactical asset class for savvy investors.