Private equity secondaries: growth drivers, transaction types and a differentiated approach

Understanding the growth of the private equity secondaries market

Private equity (PE) secondaries have become established as a strategic tool for global private markets investors. In these transactions, where an investor acquires an existing PE interest from another, the distinct needs of both parties are met:

• Limited Partners (LPs) realise liquidity and rebalance portfolios
• General Partners (GPs) onboard new investors and further the value-creation pathways of key assets
• Specialist secondaries investors access high-quality, proven assets – often at advantageous pricing and with high visibility.

The market is experiencing strong growth, with secondaries representing about 20% of global PE activity and generating a compound annual growth rate of 17% since 2015¹. In 2025, global transaction volume is expected to have reached USD 210 bn, marking a second consecutive record year and a 31% increase from 2024¹. In the first half of 2025 alone, USD 102 bn in deals was executed – the highest half‑year figure on record.

These data points indicate how secondaries have evolved from being an alternative liquidity mechanism to a strategic portfolio mechanism for LPs, a key extension pathway for GPs and a source of opportunity for specialist investors.

How secondaries enhance risk‑adjusted return potential

Secondaries have historically delivered strong and consistent risk‑adjusted returns (see Figure 1). Since 2006, the asset class has outperformed most private markets categories – including venture capital, real estate and private debt – as well as public equity markets³.

This performance profile can be explained by the distinct benefits of the asset class:

• Investors gain exposure to seasoned portfolios with clear operating histories
• The assets are typically closer to exit, which can shorten the timeframe for realising value
• Greater visibility into portfolio composition reduces blind‑pool risk.

Historically, secondaries have delivered a median net IRR of approximately 17% with a standard deviation of about 5%², indicating a favourable balance between return potential and volatility. This track record, combined with the inherent advantages of secondaries, continues to underpin the growth of the market and cement its place in broader private markets allocations.

FIG 1. SECONDARIES HAVE OUTPERFORMED MOST OTHER PRIVATE MARKETS AND EQUITIES⁴

Exploring the main types of secondaries transactions

Secondaries can be grouped into three categories, each reflecting different motivations and structural features. Understanding these distinctions helps investors assess the diversified opportunities on offer – and the skills required to negotiate these various access routes.

1. LP‑led transactions. ‘LP‑leds’ occur when LPs sell interests in PE funds before they reach maturity. Representing 52% of the market in 2024⁵, these transactions provide LPs with early liquidity and allow buyers to acquire mature assets at typically discounted valuations

LP‑leds are often used for portfolio rebalancing, cash‑flow management and reducing unfunded commitments

2. GP‑Led transactions. ‘GP‑leds’ involve the GP transferring one or more assets from a primary fund into a ‘continuation vehicle’ on the secondaries market. This allows existing investors to exit and new investors to commit – usually alongside a further allocation by the GP.  

GP‑leds offer distinct incentives for LPs, GPs and new investors:

• They allow GPs to extend the value‑creation period for their most promising companies
• Existing LPs can choose between realising liquidity or continued participation
• Buyers gain access to high‑quality assets with well‑documented operating histories.

These characteristics help explain why GP-leds form a fast-growing segment. In 2024, deal volume reached USD 71 bn – a 39% year‑on‑year increase – and rose to USD 48 bn in H1 2025⁶.

3. Direct secondaries. ‘Directs’ or ‘company-led secondaries’ are a more specialised transaction type in which an investor acquires an equity stake directly in a firm outside of a GP‑sponsored process. Typically arising when early shareholders or founders seek liquidity, successful participation in directs requires advanced skills from investors:

• Robust underwriting capabilities
• Deep market access and counterparty networks
• Flexibility in structuring.

Directs are particularly compelling in the small‑ and mid‑markets, given the transaction sizes, necessity of strong networks and reduced competitive pressure relative to the large- and mega-cap arenas.

 “Historically, secondaries have delivered a median net IRR of approximately 17% with a standard deviation of about 5%²”

Why investors are allocating more to secondaries

Across transaction types, secondaries provide a range of embedded benefits that are unique to the asset class:

• Mitigation of the J‑curve: due to the maturity of the assets, investors avoid the early performance drag typical of primary fund investments
• Entry discounts to NAV: valuations are typically struck at a price below the stated market value, offering immediate value uplift
• Accelerated capital deployment: more than 75% of the capital committed to a transaction is often deployed on day one
• Reduced blind‑pool risk: the track records of assets already in primary programmes allow for stronger due diligence
• Enhanced diversification: across PE strategies, vintages, geographies and sectors.

These drivers support a secondaries return profile that is comparable to delivering the performance potential of early-stage venture capital with the risk of a diversified PE fund-of-funds programme.

Read also: Harnessing private markets to invest in structural shifts: LOIM’s approach

Our approach: a hybrid, asset‑centric strategy for a rich opportunity set

Lombard Odier has invested in the secondaries market since 2009 and generated a successful track record across four vintages. Our hybrid strategy accesses GP‑led, direct and concentrated LP‑led transactions in the European and US mid-markets. We apply a proven playbook that is characterised by:

• Diversified sourcing channels
• Extensive partner networks
• Asset‑focused underwriting capabilities.

In a fast-growing and evolving market, we believe our access and approach enable us to capitalise on some of the best opportunities in the PE market as we seek to generate differentiated alpha potential for investors.