Secondaries deal growth points to depth of demand

This article is sponsored by UBS

The secondaries market overall, including GP-led secondaries, saw strong growth through 2025. What are the drivers of that growth?
Thomas Roche Toussaint

There has been a massive increase in allocations to private markets over the past decade. Private equity AUM has grown from roughly $1 trillion in the early 2000s to now close to $10 trillion.

Secondaries has probably been the fastest growing segment within the private markets asset class over recent years. In many ways that growth has been astonishing – 2025 surprised everyone. Experts had predicted the market would grow 20-25 percent and in fact it grew by well over 40 percent, reaching $230 billion-$240 billion. This rapid development raises a lot of questions, but in reality this growth is much more structural – secondaries technology answers a real need for the private equity market.

Last year also marked one of the lowest years in terms of global buyout distributions, which brings us to liquidity as the first driver of growth in secondaries. Global private equity distributions have been slowing over the past few years, and the secondaries market has really stepped up, with both LPs and GPs turning to the market to accelerate liquidity. LPs have also been seeking a more predictable way to invest in private equity, with more visibility over liquidity.

The second driver is increased adoption of secondaries technology. A private equity market with an AUM of $10 trillion, given its illiquid nature, requires a mechanism to permit LPs to adjust exposures. In traditional primary investments, investors are typically locked in for close to a decade. As the market develops, it is not just liquidity that investors turn to the secondaries market for, but also as a means to rebalance portfolios and manage exposures much more actively. Over the last few years, as the macroeconomic backdrop has shifted, investors have often looked to adjust exposures to sectors, regions and strategies. The secondaries market provided optionality and we saw a lot of LPs coming regularly to the market for that reason.

The market is also very different today than it was a decade ago, or even five years ago. Processes are much clearer and smoother for the sellers, and the buyer landscape also has much more depth. Overall, secondaries processes are much more predictable for participants today.

Continuation vehicles are just one element of market growth, but over the last few years have rapidly become a mainstream tool for GPs. Continuation funds have cemented their role as a fourth exit route, allowing sponsors to retain exposure to their marquee assets, curate their exit timing and deliver liquidity options for investors.

Another driver of market growth has been the availability of capital as the market has gained depth. We have seen more new entrants coming into the secondaries market, with more dedicated funds, including 40 Act funds and evergreen funds that are more flexible for some investors. The secondaries market is well suited to those types of funds, and their growth has increased capitalisation to support even more activity.

Finally, the secondaries market offers an advantage over primary fund investment when it comes to capital efficiency. By investing in secondaries, money can be put to work much more quickly, giving rapid exposure across a number of assets. In secondaries transactions, the assets you are investing in are typically already known, so an LP can be almost fully invested from day one with a diverse exposure across geographies, strategies and managers. Investing in secondaries effectively allows investors to invest in portfolios mid-race, with the ability to back multiple runners in different positions and a faster route to liquidity.

We have seen CV transactions getting larger and more complex. What additional challenges and opportunities does that create for secondaries investors?

We have seen a significant growth in the size of both GP-led transactions and LP portfolio deals. Last year, Jefferies recorded 29 GP-led deals above $1 billion, a 57 percent increase compared with 2024, which not just proves the capital depth of market demand, but also the confidence of GPs that come to market with their larger trophy assets.

From an opportunity perspective, larger deals, when they include multiple assets or portfolios, translate into more chances to get exposure to diversified portfolios of strong assets. This continues to drive sustained flow from pension funds and sovereign wealth funds. We also see wealth and family offices growing to around 5 percent of the market. Those newer entrants are increasingly convinced by the solutions on offer in the secondaries market, to both manage and build out their private equity exposure.

Large deals also usually imply a syndication, which creates opportunities for GPs to bring in new LPs and build relationships via these transactions to support future fundraises.

This all seems great from the outside, but in reality careful selection and due diligence remain key to picking the right transactions. A large portfolio means more work to due diligence those deals. The key is to maintain discipline, because you still need to complete your due diligence in the same amount of time to win assets.

Investors need robust investment processes, as well as strong relationships with the GP and LP markets in order to have deep information pools at hand. There is also more focus on alignment with GPs during those processes because bigger deals mean bigger bets, and investors want to ensure GPs still have skin in the game going forward.

How do you see macroeconomic factors, and a potential uptick in M&A and exits, impacting appetite for GP-leds this year?

As mentioned, much of the growth has been structural. Obviously lower levels of distributions have helped to put secondaries in the spotlight, but the M&A market was picking up last year and secondaries activity remained strong.

We hope to start seeing an uptick in exits that will potentially relieve some of the pressure on DPI, but that will not put secondaries out of the picture. Liquidity pressures may ease but there is still a significant backlog, and the strategic reasons for accessing the secondaries market will not go away.

Going forward, we see LPs continuing to use secondaries for active portfolio management and to rebalance portfolios, while GPs will look to that fourth exit option when M&A markets are volatile and valuations are variable. Activity may become more sector specific, but GPs with great assets that they want to hold for a few more years will continue to benefit from that enhanced ability to curate their exits.

We have seen a lot of fundraising for secondaries strategies, traditional GPs launching dedicated strategies and overall, a lot of new entrants with capital to deploy. The market is better capitalised than ever before, giving potential GPs and LPs more confidence to come to market.

As secondaries continue to evolve from a backstop liquidity solution into a more proactive portfolio management tool for both GPs and LPs, we expect even more activity to come this year.

What should investors prioritise when evaluating single- or multi-asset GP-led transactions?

All secondaries opportunities are not created equal, and we try to focus on the transactions that are being done for the right reasons. Due diligence has significantly increased over the last few years. The way the underwrite is done is now more akin to fresh capital investments – investors rely less on the GPs and conduct a lot more external due diligence, with asset quality and durability of cashflows remaining the key items of focus. Quality of the asset and sustainability of performance are much more prominent today in the investment rationale than simply the discounts that secondaries deals can offer.

Talking about rationale, there is also a lot of focus on why a secondaries transaction was selected, why the GP is willing to retain exposure, and how replicable the performance achieved is. Investors also expect even more clarity around the exit route in these secondaries processes. Finally, investors need to buy into the valuation and scrutinise it against comparables, trends and potential exit scenarios.

On single-asset deals, investors look for GPs that know the assets well and have delivered on similar playbooks in the past. On multi-asset deals, concentration across the portfolio is also very important and sometimes overlooked. Backing a portfolio of assets across different sectors, geographies, etcetera, requires an understanding of what risk assumptions are made and what cross-asset correlation looks like.

Thomas Roche Toussaint is head of private equity secondaries and co-investments at UBS