The secondary market for private equity is no longer a distressed-asset clearinghouse—it's become a strategic liquidity mechanism that LPs actively plan around. In 2024, secondary market transaction volume reached a record $162 billion, a 45% increase from 2023. More striking: LP-led transactions in buyout portfolios priced at 94% of NAV, up 300 basis points year-over-year. For fund managers, this transformation creates both opportunity and imperative: LPs increasingly evaluate liquidity options when making commitment decisions, and managers without clear liquidity pathways face a competitive disadvantage.
The first half of 2025 accelerated this momentum. Global secondary transaction volume reached $103 billion in H1 2025—a 51% increase from $68 billion in the same period of 2024, setting a new six-month record. Based on this trajectory, full-year 2025 volume could reach $200 billion, establishing another record. The secondary market has evolved from an occasional exit mechanism into a core component of how sophisticated LPs manage private market portfolios.
Understanding the Secondary Market Transformation
The secondary market's evolution from niche to mainstream reflects fundamental changes in how institutional investors approach private markets. A decade ago, secondary sales often signaled distress—an LP forced to sell due to financial difficulties, accepting steep discounts to exit illiquid positions. Today, secondary transactions are portfolio management tools used by sophisticated investors optimizing allocation, managing denominator effects, and strategically recycling capital.
BlackRock's analysis reveals the market structure: LP-led transactions accounted for 54% of 2024 volume, continuing a long-term pattern of LP-led deals representing the majority of activity. Buyout portfolios—representing 70% of LP-led volume—commanded the strongest pricing at 94% of NAV. This pricing environment reflects competition among secondary buyers flush with committed capital, not desperation among sellers.
GP-led transactions reached a record $75 billion in 2024, representing 44% growth from 2023 and surpassing the previous record from 2021. Continuation vehicles, strip sales, and tender offers have become standard tools for GPs managing portfolio company exits and fund wind-downs. These GP-initiated transactions often provide LPs with liquidity options they didn't have at fund formation.
Why LP Liquidity Expectations Have Changed
Multiple factors drove the shift in LP expectations around liquidity. The most significant was the challenging M&A and IPO environment of 2022-2024, which slowed traditional exit activity and left LPs holding aging portfolios with limited distribution inflows. According to Commonfund research, secondary volume represented approximately 20% of total global PE exit activity in 2024—double the 10-year average of 10.4%. When traditional exits don't materialize, secondaries become essential.
Denominator effects during market volatility created urgent rebalancing needs. When public equity markets decline while private market NAVs lag, institutional investors become overallocated to alternatives relative to policy targets. Some pension funds and endowments saw private market allocations drift 5-10 percentage points above targets. Secondary sales became necessary to restore portfolio balance.
Regulatory changes increased liquidity requirements for some LP categories. Insurance companies facing updated capital requirements needed to reduce certain private market exposures. Banks responding to stress test scenarios trimmed alternative allocations. These regulatory-driven sales had nothing to do with investment conviction—the positions might have been performing well—but rules required liquidity that traditional fund structures couldn't provide.
How Liquidity Options Influence LP Commitment Decisions
Smart LPs now evaluate liquidity pathways during initial commitment decisions, not as afterthoughts when circumstances force action. This evaluation happens formally and informally, influencing which managers receive allocations and which get passed over.
Fund structure flexibility matters. LPs prefer fund structures that accommodate secondary transfers without requiring GP consent for routine transactions. Side letters limiting transfer restrictions, established ROFR procedures that don't create indefinite delays, and clear LP transfer provisions all signal GP understanding of liquidity realities.
GP-led transaction track record provides comfort. LPs ask about GPs' experience with continuation vehicles, tender offers, and other GP-initiated liquidity events. Managers who have successfully executed these transactions demonstrate operational capability and willingness to provide options.
Operational infrastructure signals readiness. Secondary transactions require sophisticated administration: accurate NAV calculations, clean cap table records, transferable documentation, and efficient processes for executing transfers. LPs increasingly assess whether GPs have systems supporting smooth secondary transactions.
The GP-Led Secondary Toolkit
Fund managers have multiple mechanisms for providing LP liquidity without waiting for traditional exits.
Continuation vehicles allow GPs to retain high-quality assets beyond original fund terms while offering existing LPs the choice to cash out or roll into the new vehicle. A fund approaching its term limit with a portfolio company still growing can form a continuation vehicle, give existing LPs a liquidity option at current NAV, and attract new capital to fund continued ownership.
Tender offers provide formal opportunities for LPs to sell positions back to the fund or to designated buyers. Running organized tender processes—at predetermined intervals or when LP demand warrants—creates predictable liquidity windows.
Strip sales involve selling portions of multiple portfolio companies to secondary buyers, giving existing LPs partial liquidity while maintaining portfolio exposure.
Facilitating LP-led transactions means actively supporting LPs who want to sell positions on the secondary market. GPs can provide accurate NAV data, clean documentation, and efficient consent processes rather than creating friction.
Pricing Dynamics in Today's Market
Secondary transaction pricing has improved dramatically from historical norms, though it varies significantly by asset type, vintage, and market conditions.
Buyout portfolios lead the market with average pricing around 94% of NAV in 2024—the strongest since early 2022. This reflects both strong underlying asset values and competition among secondary buyers. High-quality portfolios from established managers sometimes trade above NAV when buyers see more upside than sellers.
Average LP portfolio pricing reached approximately 90% of NAV in H1 2025, up from 89% the prior year. This aggregate figure masks significant dispersion—distressed sellers or lower-quality portfolios might still see 70-80% pricing, while premium portfolios command par or better.
Venture capital secondaries typically price at steeper discounts than buyout, reflecting greater NAV uncertainty and longer paths to liquidity. The gap between VC and buyout secondary pricing has persisted even as the overall market improved.
How Polibit Supports Secondary Market Readiness
Polibit's platform provides the operational infrastructure that makes secondary transactions efficient—benefiting both GPs managing the process and LPs seeking liquidity.
Real-Time NAV Visibility: The investor portal provides LPs with current performance data that supports secondary marketing and transaction negotiation. When an LP considering a secondary sale can share real-time returns and current NAV with potential buyers, transactions happen faster at better pricing.
Clean Cap Table Administration: Polibit maintains accurate, up-to-date records of investor positions that facilitate transfer execution. When secondary transactions close, the platform updates ownership records automatically, maintaining audit trails.
Compliance Validation: Secondary buyers need assurance that new investors meet fund requirements. Polibit's KYC/AML verification against 300+ international watchlists can process incoming transferee due diligence efficiently.
Coming Soon - Private Secondary Market (peer-to-peer trading): Polibit's roadmap includes features enabling LP-to-LP position transfers within the platform—supporting informal secondary activity among existing investors before positions reach the broader market.
Key Takeaways
- • Secondary market volume reached a record $162 billion in 2024 (45% increase), with H1 2025 tracking toward $200 billion full-year
- • LP-led buyout transactions now price at 94% of NAV—secondary sales no longer signal distress
- • LPs increasingly evaluate liquidity options when making new commitments; managers without clear pathways face competitive disadvantage
- • GP-led tools—continuation vehicles, tender offers, strip sales—provide proactive liquidity options beyond traditional exits
- • Operational infrastructure supporting accurate NAV, clean records, and efficient transfers enables better secondary execution
Ready to build operational infrastructure that supports LP liquidity needs? Polibit provides real-time NAV visibility, clean cap table administration, and coming soon—private secondary market features for peer-to-peer trading. Schedule a Demo to see how we support secondary market readiness.
Sources
- BlackRock Secondary Market Outlook 2025
- Jefferies Global Secondary Market Review H1 2025
- Commonfund Private Equity Secondary Analysis
- William Blair Secondary Market Report 2025