Interview
The Rise of Secondaries: Unlocking Liquidity in Private Markets
- Retail participation in the secondaries market is projected to expand organically by approximately 50% and likely enter the sector slightly later than other participants, introducing increased liquidity to facilitate more transactions.
- Secondaries volume is forecast to exceed $200 billion annually within the next five to ten years, driven by accelerating turnover rates in private equity, private credit, infrastructure, and real estate as these asset classes mature.
- Market dynamics are anticipated to shift toward a larger but more competitive environment where sellers benefit from a friendlier climate, though large portfolio sales may require multiple quarters to close.
- Investors are expected to treat secondaries as a core allocation with a favorable risk-return balance and faster capital deployment, gaining the ability to maneuver between asset classes more easily while LPs gain comfort with longer ownership terms.
- Continuation vehicles are expected to see high market acceptance as managers utilize trophy assets for extended holding periods, while the total dry powder remains insufficient to meet the likely supply of volume.
- Growth will be supported by a supply-demand imbalance creating positive risk-reward prospects for new LPs, particularly as discounts narrow and NAVs become more reasonable to attract an influx of sellers.
- Specific asset classes show divergent trajectories: private credit and infrastructure are expected to maintain growth momentum with turnover rates running at roughly half that of private equity, while private equity firms face a landscape of relative winners and losers where some are unlikely to return substantial capital to LPs.
- First-time sellers will undergo significant education regarding transaction complexities and must thoughtfully select liquidity venues to maximize value for esoteric assets, with secondaries serving as a portfolio optimization tool rather than a solution for fundamental investment failures.