Overview of the Secondary Market

The secondary market is the secondary market for private equity, allowing investors to sell their positions before a fund’s maturity. Sellers use it to rebalance their portfolio, generate liquidity, or implement a change in strategy. This market, which is worth approximately 200 billion annually, primarily attracts specialized institutional buyers. The advantage for these buyers lies in acquiring mature portfolios, which offer greater visibility into the assets and significantly reduced initial risk. Furthermore, purchases are often made at a discount of 10 to 20 percent, which accelerates cash flow. However, this asset class has limitations, notably a return that is often capped at around 15% net o IRR , a shorter remaining term, and very high diversification, which dilutes the economic picture. Transactions are divided between LP-led deals, initiated by an investor, and GP-led deals, orchestrated by the Fund manager s through continuation funds.