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The secondary market comes of age as a mainstream exit route
Lombard Odier Secondaries Team
key takeaways.
Once viewed as a stopgap, the secondary market has evolved into an established exit route within private equity, alongside more traditional channels (IPOs and M&A)
Secondaries have become a core liquidity mechanism, supporting capital redeployment and more active portfolio management
Access to high-quality assets and differentiated return drivers help position secondaries as a strategic private-markets allocation.
Secondary transactions were once primarily used to bridge periods of weak IPO and M&A activity. Over time, however, the market – where investors acquire existing private equity (PE) interests – has evolved into a mainstream liquidity source in its own right.
The range of transaction types has broadened significantly beyond traditional LP-led portfolio sales to include, amongst other solutions, GP-led continuation vehicles (CVs) and direct secondaries. These formats allow liquidity to be created without requiring a full sale of the underlying company, enabling more flexible exit pathways.
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Entering the PE mainstream as a third way
M&A and IPO activity has been recovering from its post-pandemic lull, improving exit conditions for PE investors. Yet the momentum toward secondaries has persisted.
In 2025, the secondary market reached a new peak, driven by record levels of GP- and LP-led deals. With roughly equal contributions from both segments, total volume reached USD 220 billion, up 42% year-on-year. This growth outpaced global M&A and tracked closely with the rebound in IPO markets1.
The recovery in M&A and IPOs has also been uneven. Although M&A volumes increased to nearly USD 5 trillion last year, the recovery was concentrated in megadeals – midmarket activity stayed relatively static. The IPO market was similar: proceeds rose to about USD 181 billion while the total number of offerings changed little1. Many PE portfolios continue to face constrained liquidity and longer holding periods, strengthening the role of secondaries as a credible exit alternative.
The main types of secondaries transactions
LP‑led. LPs sell interests in PE funds before they reach maturity
GP‑led. GPs transfer one or more assets from a primary fund into a CV. Existing investors can exit and new investors can commit – usually alongside a further allocation by the GP
Direct (company-led). An investor acquires an equity stake directly in a firm outside of a GP‑sponsored process.
To learn more about secondaries transaction types and market dynamics, please read our educational paper.
Less market risk and more privacy
Against this backdrop, CVs are gaining traction – they are projected to represent around 20% of GP exits annually2 in the coming years. This reflects the broader appeal of GP-led secondaries as an alternative to IPOs.
While IPOs are highly sensitive to market windows and require extensive public disclosure, GP-led transactions allow for private negotiations with a concentrated group of buyers, reducing execution risk and preserving confidentiality.
CVs also provide greater flexibility over timing and valuation, enabling GPs to avoid forced exits in volatile conditions and to structure tailored liquidity solutions for investors. While GP-led transactions can take several months to execute, they are still typically much more efficient and more predictable than going public.
Collectively, these dynamics have contributed to the evolution of secondaries from being simply a substitute option. Instead, they have become an embedded, often value-optimising component of the PE exit toolkit.
Secondaries as a strategic private‑markets allocation
Alongside their role in facilitating liquidity, secondaries have emerged as a distinct and increasingly important investment strategy within private markets. A growing share of LP capital is shifting into secondaries, gradually displacing traditional fund of funds (FoFs) as a preferred vehicle for diversified PE exposure.
Secondary fundraising grew from ~5% of total PE fundraising in 2021–2022 to almost 15% in 2025 – this growth reflects a reallocation away from traditional PE FoFs, which declined to ~3–5% of total fundraising in the past two years3.
At the same time, investor participation has broadened. While institutional investors remain the largest source of capital, their share of commitments fell from about 80% in 2021 to about 65% in 2025. Meanwhile, wealth-management platforms and retail-oriented vehicles combined expanded from roughly 9% of total commitments to about 24%4.
Demand for secondary investments is driven by several structural advantages, including:
Returns. They have delivered an historical median net IRR of ~17%, with lower volatility than many other private market strategies5. Other advantages include reduced J‑curve effects, the potential to acquire assets at discounts to NAV and accelerated cashflow profiles
Flexibility. Bespoke deal structures can be tailored to varying LP liquidity needs. GP-led deals have been central to this evolution, allowing sponsors to extend ownership of high-quality assets while offering LPs optional liquidity or reinvestment. Direct secondaries allow companies to create periodic liquidity for shareholders including early investors and employees, while attracting new capital and strategic partners
Visibility. Secondary investors acquire exposure to seasoned assets with established performance histories, allowing for more informed underwriting. In GP-led transactions, access to detailed company-level information enables a diligence process more akin to direct investing.
A core, long‑term component of institutional portfolios
These features have led to secondaries being incorporated more systematically into portfolio construction. Institutional investors increasingly use them for portfolio rebalancing, liquidity management and vintage diversification.
The growth of dedicated capital reflects this trend. Secondary dry powder (estimated at approximately USD 215 bn6) and continued participation from experienced buyers have deepened the market and strengthened pricing, governance and execution standards.
One strategy, multiple pathways to value
Having invested in secondaries since 2009, we have witnessed the market’s evolution firsthand and deeply understand the dynamics of the ecosystem.
Our differentiated approach combines multiple transaction types, sourcing channels and investment disciplines into a single, cohesive strategy. We invest across LP-led, GP-led and direct deals in the mid-market, leveraging our expertise and extensive partner networks to capture opportunities globally.
With an asset-centric investment mindset, this hybrid approach allows us to access the most attractive opportunities in the market across geographies, deal types, maturity stages and structures.
An established feature of private markets
This shift is evident across large institutional investors. Public pension funds now allocate roughly 30–35% of assets to alternatives, with around 10–12% in PE, where secondaries are used systematically. Similarly, sovereign wealth funds, with private markets allocations of approximately 25–30% of AUM, increasingly rely on secondaries as an ongoing tool to manage liquidity and maintain target exposures7.
In summary, secondary transactions now represent a core route for realising value and generating liquidity. As an investment strategy, they offer a differentiated way to access private markets. Together, these dynamics have transformed secondaries into a permanent, integral feature of the private-markets ecosystem.
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2 Greenhill & Co., Global Secondary Market Review FY 2024, via Secondaries Investor, 13 February 2025.
3 2025 Secondary Market Report, UBS Private Funds Group
4 Investor composition estimates based on Preqin, Jefferies, With Intelligence / S&P Global, Bloomberg and asset manager disclosures (2021–2025). Note: Investor cohort allocations are estimated using industry-standard triangulation rather than disclosed fund-level data; figures reflect commitments raised (not deployed capital); and retail participation is concentrated in a limited number of large evergreen vehicles, which can introduce variability year to year.
5 Source: Preqin. Note: Most up-to-date data as at February 2025. For illustrative purpose only. Past performance is not a guarantee of future results.
7 Based on Reason Foundation, Wellington Management, Northern Trust, SSGA, Franklin Templeton and Invesco research on institutional asset allocation and secondaries usage (2023–2025). Note: Figures reflect broad industry averages and survey-based disclosures rather than uniform policy targets; secondaries are typically embedded within PE programmes rather than reported as standalone allocations; and adoption varies by institution size, governance model and liquidity needs.
important information.
For professional investors use only
This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice.
