Private equity (PE) has outgrown its ‘alternative asset class’ status over the last two decades. With assets under management (AuM) now exceeding USD 10 trillion, it has become a core component of both institutional and private wealth portfolios. This transformation reflects not only the growth in capital inflows but also structural shifts across the broader corporate and investment landscape.
As investor demand and AuM continue to rise, secondaries have emerged as a strategic way to address one of the main challenges of the PE market: illiquidity. Secondaries provide an important liquidity mechanism, allowing investors to consider earlier exits than the traditional 10-12-year lock-up period associated with primary PE investments. Yet the appeal of the secondary market goes far beyond a simple liquidity tool for investors and is increasingly viewed as a valuable investment strategy for portfolio construction and management.
Investing in secondaries is often considered a way to address traditional PE timelines through faster capital deployment and earlier distributions, which can be used as a means to mitigate the typical ‘J-curve’ effect. Secondaries can also facilitate rapid diversification by investing in already ‘in-portfolio’ assets, enabling exposure to a broad range of sectors, geographies, vintages, multiple managers, and companies from day one. The assets come with historical performance data that can be reviewed, and the same portfolios and companies are often offered at discounted prices due sellers’ liquidity needs. While not all secondary opportunities are created equal and thorough due diligence is essential to identify quality assets and value creation potential, secondaries can help improve the overall risk-return profile and volatility for investors.
As PE continues to grow and becomes more accessible, secondaries are increasingly viewed as a flexible and strategic way to build and manage portfolios. They attract both institutional and high-net-worth investors seeking access to private markets and aiming to quickly establish a well-diversified core position in PE.
