In 2025, the once-obscure world of secondary transactions in private capital has moved from the sidelines to center stage. Jefferies’ Global Secondary Market Review reports that secondary market volume surpassed $160 billion in 2024, marking it as the most active year on record. LP-led transactions made up approximately 53% of the total volume, bouncing back from previous-year lows, while GP-led deals accounted for nearly 47%. Importantly, this surge was not driven by distressed fire sales, but by orderly, strategic divestments in a more mature and competitive secondary landscape.
This article delves into how the secondaries market is evolving in 2025, spotlighting key drivers and emerging dynamics. We examine the “new fundraising reality” prompting LPs and GPs to turn to secondaries for solutions, and why GP-led secondary deals are becoming a new normal. Throughout, we consider the opportunities this shift creates for LPs seeking liquidity or portfolio rebalancing and GPs seeking flexibility, as well as the potential risks and challenges. Our aim is to provide an analytical take on why secondaries have become a strategic cornerstone and what it means for industry players moving forward.
The roots of this secondary market expansion trace back to fundamental shifts in private market dynamics. After a decade of robust expansion, private markets faced a liquidity crunch leading up to 2024, with global private equity fundraising falling for a third consecutive year. Many limited partners (LPs), over-allocated to alternatives, found themselves constrained in making new commitments as distributions from prior investments slowed during the exit market cooldown. To address this capital allocation challenge, institutional investors turned to the secondary market to sell fund stakes or restructure holdings and free up capital without relying on traditional exits.
This transformation gained momentum from multiple converging forces. Several forces amplified this momentum: a record stockpile of dry powder raised by dedicated secondary funds, a wave of new entrants including retail investors via evergreen and feeder vehicles, and broader institutional adoption. According to Torys’ Winter 2024 Quarterly report, by late 2024, U.S. registered secondary funds alone had raised over $5 billion, enhancing market liquidity and compressing bid-ask spreads. Meanwhile, distributions from private funds improved, but not evenly enough to fully satisfy LP cash needs. As a result, secondary sales became a proactive strategy for portfolio rebalancing and risk management. The market's evolution was underscored by the fact that most 2024 sellers were not distressed but instead pursuing deliberate, strategic objectives.
Within this broader secondary market growth, GP-led transactions emerged as a particularly dynamic segment. According to Blackstone, single-asset continuation vehicles (CVs) remained a dominant force in the GP-led secondary market in 2024, comprising roughly 48% of total GP-led volume. Their continued growth reflects the appeal of high-quality underlying assets, strong alignment with sponsoring GPs, and an increasing focus on sector-specific strategies which is a substantial improvement from historical discounts that reflects both asset quality and competitive dynamics among secondary buyers.
As the market matured, participants developed increasingly sophisticated tools to navigate pricing challenges. With heightened valuation uncertainty, buyers and sellers increasingly employed creative solutions to bridge pricing gaps. One widely adopted technique was deferred payments or earn-outs, where sellers received 50–80% of the purchase price upfront and the remainder over time, often with a premium. To mitigate counterparty risk in these arrangements, buyers provided credit enhancements like parental guarantees or equity pledges. Meanwhile, buyers financed obligations through NAV-based loans, prompting intricate negotiations around payment seniority between sellers and lenders. These structures have enabled transactions to close despite valuation mismatches.
The embrace of leverage became a defining characteristic of the evolving market structure. According to Cadwalader, both LP-led acquisitions and GP-led continuation vehicles utilized NAV-based credit facilities, subscription lines, and hybrid financing. Even traditionally conservative buyers embraced leverage due to the sheer volume of attractive opportunities. On the opposite side of these transactions, installment sales effectively turned sellers into lenders. While leverage introduces risk, lenders have been selective, focusing on high-quality, cash-generative assets that can support repayments. These financing strategies are now core to executing and scaling deals efficiently.
The market also expanded into new asset classes, including private credit, infrastructure, and real estate, giving rise to specialized funds tailored to each niche. According to Ropes & Gray, this specialization improves execution and pricing. Meanwhile, structured solutions like preferred equity and securitized vehicles (e.g., collateralized fund obligations) offered alternative liquidity pathways. These developments underscore a broader transformation: the secondary market is now a dynamic, multifaceted ecosystem capable of supporting a wide array of investor needs and adapting rapidly to changing conditions.
However, this rapid evolution has not been without complications, particularly around governance and alignment. The rise of GP-led secondaries has brought the issue of alignment between general partners and limited partners into sharper relief. These transactions inherently place GPs on both sides of the deal creating a dual-role dynamic that requires careful structuring to maintain trust.
Regulatory bodies have taken notice of these potential conflicts and responded accordingly. Despite these measures, concerns around timing and motivation continue to weigh on LP decision-making. Some investors remain cautious, questioning whether certain GP-led deals prioritize the crystallization of carried interest over the generation of long-term value. In response to these concerns, regulatory oversight has increased. The SEC has expanded Form PF reporting requirements and introduced a new rule, which mandates fairness opinions prior to LP elections.
Regulatory bodies have taken notice of these potential conflicts and responded accordingly. Transparency and timing remain practical hurdles. LPs frequently face compressed evaluation windows for complex, bespoke deals, creating pressure to make high-stakes decisions without the benefit of extended diligence. Despite these operational challenges, confidence in the market remains strong. Survey data from Coller Capital’s Global Private Capital Barometer Report indicates that 37% of LPs intend to maintain or increase their secondary allocations in 2025, suggesting broad acceptance of GP-led solutions when supported by strong alignment mechanisms and thoughtful structuring.
These structural changes in the secondary market are forcing a fundamental reconsideration of how performance is measured. We see the emergence of GP-led secondaries, particularly single-asset continuation vehicles as a turning point for how performance is measured across the private equity landscape. Early data indicates that these deals often deliver returns on par with traditional co-investments, but without commanding a premium despite their higher concentration risk. This challenges conventional return-risk assumptions and suggests that investors need to evaluate these transactions using a more nuanced lens that considers volatility, duration, and alignment alongside raw IRR or MOIC figures.
Our analysis also flags a growing disconnect between traditional performance benchmarks and the characteristics of newer, more flexible vehicles. Semi-liquid fund structures now represent nearly a third of secondary fundraising. These vehicles blur the lines between closed-end and open-end fund models, offering lower volatility and more frequent liquidity windows. As a result, legacy metrics like vintage-year IRR are becoming less relevant, pushing the industry toward more dynamic and risk-adjusted performance frameworks that reflect the changing liquidity and structural profiles of modern private equity products.
Given these evolving dynamics, we recommend several practical steps for market participants:
Looking ahead, the fundamentals supporting GP-led secondaries appear increasingly durable. GP-led secondaries have transitioned from niche tools to foundational elements of the private equity ecosystem. The evolution of the market in 2024–2025 has underscored their ability to benefit all parties when designed with strong alignment, rigorous transparency, and a clear emphasis on value creation.
Success in this environment will require elevated capabilities across all market participants. PE professionals must cultivate advanced evaluation skills, develop specialized execution strategies, and uphold the highest fiduciary standards. For LPs, incorporating secondary strategies can unlock enhanced liquidity and improved returns. For GPs specifically, a strategic approach to identifying portfolio assets suitable for secondary solutions can create investor value while advancing fund-level objectives.
Market projections support this optimistic outlook. Industry projections consistently point toward total GP-led volumes reaching $80-85 billion in 2025, with the broader secondaries market potentially exceeding $170 billion. This isn't a temporary trend. The competitive landscape continues to evolve as well, with the dynamics among secondary buyers likely to intensify as new entrants join traditional players. Direct sponsor entry into the GP-led market, exemplified by Accel-KKR's $2.2 billion specialized fund, suggests that market participants see durable opportunities in continuation vehicle investing.
Perhaps most importantly, the opportunity set continues to outpace available capital. The market remains structurally undercapitalized relative to the opportunity set, with available dry powder insufficient to address the full $3.2 trillion in assets awaiting liquidity solutions. This supply-demand imbalance suggests that the current growth trajectory in GP-led secondaries is not just sustainable, but likely to accelerate as the market infrastructure continues to mature.