Adjusting to evolving trends

Private equity (PE) is no longer seen merely as an ‘alternative asset class’. 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 in the broader corporate and investment landscape. As investor demand and AuM continue to rise, secondaries have emerged as a strategic way to address the main challenge of the private equity market: illiquidity.

Secondaries, once considered a niche tool, are increasingly viewed as a valuable option for portfolio construction and management. They may serve as a liquidity mechanism, allowing investors to consider earlier exits than the traditional 10-12 year lock-up period associated with primary PE investments. This flexibility can be particularly relevant for investors with shorter-term liabilities, life events, or simply a change in objectives. Beyond liquidity, secondaries may offer faster capital deployment and earlier distributions, which could help mitigate the typical ‘J-curve’ effect seen in traditional PE investments.

Moreover, secondaries also support diversification by enabling exposure to a broad range of sectors, geographies, and vintages from day one. Investors can access proven assets with historical performance data, often at discounted prices due to the liquidity needs of sellers. This can contribute to improving the risk-return profile and stability of the investment. LP-led transactions allow limited partners to rebalance their portfolios, while GP-led deals enable general partners to extend ownership of high-performing assets through continuation vehicles.

The secondary market has grown significantly, with annual global transaction volumes rising from USD 10 billion in 2005 to over USD 160 billion in 2024. Despite this growth, the market remains undercapitalized, which may present opportunities for buyers. As private equity continues to expand and democratize, secondaries are increasingly regarded as a flexible and strategic tool for building and managing PE portfolios and may appeal to both institutional investors and high-net-worth individuals seeking access to private markets with potential for greater liquidity and diversification.