A $3.6 trillion overhang. Frozen IPO pipelines. A record $240 billion market emerging to fill the gap. Here is what the secondaries surge really means – and where it goes next.
$240B2025 Global Secondary Volume |
48%YoY Growth 2024→2025 |
$302BDedicated Dry Powder (mid-2025) |
$300BProjected Market Size by 2030 |
The Exit Breakdown: Why Capital Got Stuck
Private equity is sitting on a $3.6 trillion stockpile of unrealized value locked inside approximately 29,000 unsold companies. [2] The industry built its post-2008 model on a simple cadence: acquire, improve, exit within four to six years. That clock broke after the dealmaking frenzy of 2020-2021. Rising rates compressed valuations, made leveraged financing expensive, and left strategic acquirers on the sidelines.
According to the McKinsey Global Private Markets Report 2026, more than 16,000 companies globally have been held for over four years – 52% of buyout-backed inventory, the highest share on record and ten percentage points above the five-year average. [2] The typical holding period now exceeds six and a half years. For the LP base – pension funds, endowments, sovereign wealth funds – this translated directly into a distribution crisis. The denominator effect hit. New fund commitments stalled. Into this gap stepped the secondary market.
The secondary market’s growth is not a cyclical rebound. Secondary volume reached $162 billion in 2024 – a 45% surge – then $240 billion in 2025, a further 48% increase. [1] In 2024, secondary activity represented roughly 20% of total global PE exit activity, more than double the ten-year historical average of about 10%. [3] The structural implication is stark: the secondary market has become the private equity industry’s primary liquidity mechanism, not a backstop of last resort.
“In 2024, secondary volume represented ~20% of total global PE exit activity – more than double the 10-year average of 10.4%.” [3]
Two Markets in One: LP-Led vs GP-Led
The secondary market is not monolithic. Two distinct segments – LP-led fund stake sales and GP-led continuation vehicles – operate with different motivations, structures, and pricing dynamics. Their relative balance has shifted materially over the past five years, with profound implications for how private equity exits will be structured going forward.
LP-Led: How Investors Cash Out
LP-led transactions – where a limited partner sells its existing fund stake to a secondary buyer – comprised 52% of 2025 secondary volume.[1] The motivation has shifted: Lazard’s 2024 survey found portfolio rebalancing (cited by 51% of LPs) now outweighs pure liquidity needs (33%) as the primary driver for the first time.[8] Pricing has recovered to levels that make selling viable: buyout portfolios reached 94% of NAV in 2024, improving 300 basis points year-on-year.[4] The stigma of “distress selling” has largely evaporated.
GP-Led: The Continuation Vehicle Revolution
GP-led secondaries – continuation vehicles in which a manager transfers an asset into a new fund, offering existing LPs the choice to roll or take cash – have grown from $35 billion in 2020 to $115 billion in 2025, a 229% increase in five years.[2] In 2025, GP-led transactions represented approximately 14% of all sponsor-backed exit volume.[1] The attraction for GPs is clear: a continuation vehicle lets them hold a high-performing asset longer, avoid selling at a depressed market price, and bring in fresh aligned capital – while technically providing liquidity to LPs who want out.
| Dimension | LP-Led | GP-Led |
|---|---|---|
| Initiator | Limited partner | General Partner |
| Structure | Fund stake sale | Continuation vehicle |
| 2025 estimated volume | ~$125B | ~$115B |
| Typical pricing | 85-94% of NAV | 90%+ of NAV |
| Primary motivation | Portfolio rebalancing | Asset retention |
| Key structured risk | Valuation uncertainty | GP conflict of interest |
| 5-year volume growth | ~+60% | ~+229% |
| Sources: Campbell Lutyens (infrastructure); bfinance / Preqin (private credit); McKinsey (2026); Jefferies. Estimates rounded | ||
Who Is Buying – and How Much Capital Is Chasing Deals
Available capital earmarked for secondaries stood near $302 billion by mid-2025 – an all-time high.[1] Three buyer archetypes define today’s market. Traditional closed-end secondary funds (Blackstone Strategic Partners, Ardian, Lexington Partners, Hamilton Lane, Pantheon) dominate large GP-led transactions. Evergreen vehicles – perpetual structures now accessible to retail investors – have become a significant pricing force, often paying closer to NAV to maintain deployment velocity. A growing cohort of direct buyers (sovereign wealth funds, insurance companies, family offices) has also entered, attracted by discounted exposure to mature portfolios.
Despite record capital formation, the market remains structurally undercapitalized relative to opportunity. Dry powder supports roughly 1.3 years of deal activity at the prevailing pace – compared with 4.5 years of coverage across broader private equity. The number of transactions exceeding $1 billion surged: H1 2025 alone saw 56 such deals, already surpassing all 51 recorded in 2024.[6] Scale and speed of execution have become decisive competitive advantages
Beyond Private Equity: Secondaries Across Asset Classes
One of the most structurally significant developments is the expansion beyond traditional private equity buyout. Infrastructure, private credit, and real estate are all now active secondary markets – each driven by the same underlying logic: LP commitments have accumulated at scale, holding periods have extended, and conventional exit paths are limited.
Private credit secondaries more than doubled from $6 billion in 2023 to over $15 billion in 2025, with GP-led deals outstripping LP-led activity in the asset class for the first time. The driver is structural: slow PE market conditions have delayed refinancing cycles and stretched effective loan durations from two to three years toward four to five years. Infrastructure secondaries nearly doubled – from $12 billion to $20–24 billion – as data centers, energy transition assets, and long-duration infrastructure proved particularly attractive to buyers seeking stable, inflation-linked returns. [7]
Structural Implications and Risk Assessment
The McKinsey Global Private Markets Report 2026 captures the consensus: trends that once appeared niche or temporary – the growth in secondaries, the rise of continuation vehicles, the emergence of NAV lending – now appear to be enduring. With secondary volume representing only ~1% of total unrealized private capital value, the potential for further growth is substantial. The projection of $300 billion by 2030 implies a market roughly twice its 2024 size within six years.
For GPs: A Third Exit Path
Continuation vehicles have fundamentally altered the GP’s strategic calculus. Rather than a binary choice – sell at a suboptimal moment or hold and disappoint LPs – GPs now have a third path: retain their best asset in a new vehicle, provide liquidity to those LPs who want it, and bring in new capital with aligned incentives. Nearly 60% of secondary investors surveyed by William Blair in 2024 went on to commit primary capital to the same GP’s next fund following a continuation vehicle transaction – turning a liquidity event into a relationship-deepening exercise.
For LPs: A Portfolio Management Tool, not a Last Resort
The evolution of LP motivation is telling. Early secondary sales carried a stigma – distress selling at steep discounts. Today the dominant motivation is portfolio management. LPs are using secondary sales to rebalance vintage exposure, exit GP relationships that are no longer core strategy, and generate capital for new fund cycles. The normalization of this behavior has increased participation and compressed discounts simultaneously.
Risks That Deserve Honest Assessment
The influx of capital – particularly from evergreen retail vehicles competing aggressively for deal flow – has compressed pricing in some segments, reducing the margin of safety that secondary buyers have historically relied upon. Valuation opacity remains a structural vulnerability: secondary transactions are priced as a percentage of GP-reported NAV, which is subject to quarterly reporting cycles and methodological discretion. In periods of market stress, mark-to-market divergence can be significant. Bfinance [5] (February 2026) warned explicitly that investors must insist on disciplined deployment to ensure they are capturing liquidity and pricing dynamics rather than absorbing overly optimistic projections.
GP conflict of interest in continuation vehicles is the second structural concern. A general partner simultaneously setting the price (via its NAV report) and buying the asset (through the new vehicle) creates an inherent tension requiring independent valuation advisors, fairness opinions, and robust LP advisory committee oversight – protections that are inconsistently applied across the market. Finally, the macro environment remains a variable. New tariff regimes, geopolitical volatility, and potential interest rate shifts could all effect NAV trajectories and spreads of bid-asks.
The Liquidity Infrastructure of Tomorrow
The secondaries boom is not a symptom of private equity’s distress. It is private equity’s adaptation – a market-driven solution to the structural mismatch between the long-duration, illiquid nature of PE funds and the liquidity expectations of a sophisticated LP base. In this sense, secondaries are performing for private markets what bond markets perform for corporate finance: providing continuous, price-discovered liquidity to what would otherwise be a frozen asset class.
But the boom arrives with three hidden costs that most participants have not fully priced in. The returns math requires disciplined fee management and entry pricing that preserves a genuine economic advantage – conditions under increasing pressure as capital floods in and NAV discounts compress to single digits. The DPI rescue secondaries provide is real, but it papers over rather than resolves the deeper problem: a market built on self-reported quarterly NAV marks where TVPI and IRR can both mislead. And the governance frameworks designed to protect LPs in continuation vehicle transactions remain voluntary, inconsistently applied, and structurally tilted toward the GPs and large institutional buyers who set the terms.
At $240 billion in 2025 and heading toward $300 billion within the next one to two years per Jefferies’ projections, the secondary market has crossed the threshold from opportunistic sideshow to essential market infrastructure. The participants who benefit most are those who navigate all three dimensions simultaneously: the volume dynamics that make the market large, the return mechanics that determine whether secondary exposure genuinely adds alpha, and the governance frameworks that determine how that value is ultimately allocated.
Secondaries are now embedded in the core functioning of private markets – and their long-term value will be defined not by their growth, but by the discipline with which they are executed.
Mini Case: Value Creation through GP-Led Secondary (Continuation Fund)
Background
A mid-market private equity fund (“Fund II”) held a controlling stake in a high-performing healthcare services company that had already undergone significant operational improvement, with EBITDA growing ~2.5x over a five-year hold. As the asset matured, it reached a new inflection point: geographic expansion required incremental capital, a digital transformation strategy was underway, and strategic buyers failed to fully reflect the company’s forward growth potential in their valuations.
Challenge
The GP faced a familiar trade-off. A near-term exit would crystallize returns and deliver liquidity to LPs, but risk leaving meaningful upside unrealized. Extending the hold period, however, would create misalignment with LP liquidity expectations and fund life constraints.
Solution: GP-Led Secondary (Continuation Vehicle)
To bridge this gap, the GP executed a continuation fund transaction. The asset was rolled into a new vehicle managed by the same sponsor, with existing LPs offered the choice to either exit at ~1.8x MOIC or roll over their exposure. New secondary investors were brought in at a reset valuation, alongside additional capital to fund the next phase of growth.
Value Creation Post-Transaction
The continuation structure enabled a second, more targeted value creation cycle. Over the subsequent three years, the company expanded into three new markets, completed a digital platform buildout that improved margins by ~400 basis points, and executed bolt-on acquisitions to increase scale and market share. Management incentives were realigned to reflect this renewed growth strategy.
Outcome
The asset was ultimately exited at ~3.0x MOIC for continuation fund investors. LPs who chose to roll over realized an incremental ~1.7x uplift relative to a full exit at the earlier stage, while new investors accessed a de-risked asset with clearer visibility on growth and execution.
Relevance to the Broader Market
This case illustrates how secondaries have evolved beyond a pure liquidity mechanism into a tool for duration arbitrage and value optimization. By decoupling asset hold periods from fund life constraints, continuation vehicles enable sponsors to extend ownership where value creation is not yet fully realized. At the same time, outcomes remain highly sensitive to entry pricing, governance alignment, and the discipline of the underwriting process reinforcing the broader dynamics shaping the secondary market today.
Appendix
Sources:
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Jefferies. Global Secondary Market Review, January 2026. Available at: https://www.jefferies.com/insights/the-big-picture/2025-global-secondary-market-review-another-record-breaking-year/
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McKinsey & Company. Global Private Markets Report 2026, February 2026. Available at: https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report
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Evercore / Commonfund. Blossoming New Era of Secondaries FY 2024 Secondary Market Review, 2025. Available at: https://www.commonfund.org/cf-private-equity/blossoming-new-era-of-secondaries
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BlackRock. Secondary Market Outlook, 2024. Available at: https://www.blackrock.com/institutions/en-us/insights
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bfinance. As Private Market Secondaries Soar, Investors Must Demand Discipline, February 2026. Available at: https://www.bfinance.com/insights
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William Blair / Private Capital Advisory (PCA). 2025 Secondary Market Report, March 2025. Available at:https://www.williamblair.com/Insights
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Campbell Lutyens. Infrastructure Secondaries Market Data, 2025. Available at: https://www.campbell-lutyens.com/
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Lazard. Secondary Market Report, 2024. Available at: https://www.lazard.com/research-insights/lazard-2025-secondary-market-report/
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CAIS Group. What’s Behind the Continued Growth in Private Markets Secondaries?, 2025. Available at: https://www.caisgroup.com/insights
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