Once considered a niche liquidity tool, they’ve emerged as a strategic lever, facilitating longer holds, optimizing portfolios, and unlocking capital in ways the market is only beginning to fully appreciate.

The data appears to reflect it: record volumes, broader adoption, and a shift in how both GPs and LPs approach lifecycle management.

This isn’t just about exits, either, though. It’s about optionality, offering investors a path to balance diversification and duration on their own terms.

The implications? Still taking shape. The momentum? Undeniable.

Frequently Asked Questions

What are private equity secondaries, and why are they gaining traction?

Private equity secondaries involve the buying and selling of existing interests in private equity funds or direct investments, as opposed to primary fund commitments.

Their growing popularity stems from record transaction volumes, reaching $162 billion globally in 2024, a 45% increase from 2023.

These transactions provide flexibility, allowing LPs to access liquidity while enabling General Partners GPs to extend hold periods for high-performing assets through continuation funds. Additionally, economic uncertainty has driven LPs to use secondaries for portfolio rebalancing amid market volatility.

What’s the difference between LP-led and GP-led secondaries?

LP-led secondaries occur when Limited Partners sell their fund stakes to third parties, often for liquidity needs or portfolio rebalancing.

In contrast, GP-led secondaries are initiated by General Partners, typically through continuation funds, to retain high-performing assets beyond a fund’s original lifecycle. GP-led deals now account for 90% of such transactions, reflecting their dominance in the market.

What are continuation funds, and why are they so popular?

Continuation funds are new investment vehicles created to acquire assets from older private equity funds nearing the end of their lifecycle.

They allow GPs to extend hold periods for high-growth assets, offering LPs the choice to cash out, roll their interests into the new fund, or opt for a combination of both.

Their popularity is driven by strong asset performance, LP demand for liquidity options, and secondary buyers’ preference for stable, high-quality investments.

A notable example is Trustar Capital’s $1 billion continuation fund for its McDonald’s operations in China and Hong Kong.

What are the risks associated with continuation funds?

Key risks include valuation disputes, as setting a fair price for transferred assets can be contentious.

Conflicts of interest may arise if GPs are perceived to favor certain investors, necessitating third-party fairness opinions and transparent disclosures.

Regulatory scrutiny is also increasing, with bodies like the SEC and ESMA paying closer attention to these transactions.