TL;DR: The secondary market for private equity stakes hit $162 billion in 2024 and $233 billion in 2025, per Lazard. LP-led secondaries give fund investors a way out before the fund's natural life ends. GP-led continuation funds let sponsors hold their best assets longer while still delivering liquidity. Both sides of this market matter to lower middle market operators, investors, and anyone evaluating a PE deal. Here is how it works and what it means for you.
According to Lazard's 2025 Secondary Market Report, the private equity secondary market hit $233 billion in total transaction volume last year, up 53% from the prior year's record of $152 billion. That pace of growth, sustained over multiple consecutive years, puts this market in a different category than most institutional investors expected a decade ago. It is no longer a niche liquidity outlet. It is a functioning capital market with real infrastructure, real price discovery, and real consequences for anyone participating in private markets.
If you own a business and are evaluating PE buyers, or if you are an LP considering a fund commitment, understanding the secondary market changes the math.
What private equity secondaries actually are
Private equity is not liquid. Once an LP commits capital to a fund, they are locked in for 10 years or more. The fund buys companies, runs them for three to seven years, exits, and distributes the proceeds.
The secondary market is where LP stakes in those funds trade before the fund's natural life ends. Instead of waiting for distributions, an LP can sell their interest to a secondary buyer and get cash today.
That is the core mechanic. Two versions of it dominate the market: LP-led transactions and GP-led transactions. They work differently. They serve different purposes. And they have different implications for the portfolio companies in the middle.
LP-led secondaries: when investors need out
The original version of secondaries is LP-led. A pension fund, endowment, or family office with too much exposure to private equity sells a portion of their fund stakes to a secondary buyer. The price is negotiated. Secondary buyers typically pay a discount to the fund's net asset value, which means the seller accepts less than book value in exchange for immediate liquidity.
In 2024, LP-led transactions reached approximately $80 billion globally, per Jefferies' Global Secondary Market Review. Average buyout fund portfolios sold at 13.3% below NAV, an improvement from 15.7% the prior year. Sellers accepted the haircut because liquidity had a price, and they were willing to pay it.
For LPs who are over-allocated to private equity, running a secondary sale is portfolio management. Not panic. Pension funds run these processes the same disciplined way they run rebalancing in public markets. The secondary market gave them a mechanism to do it.
Pricing varies by fund quality and age. Well-performing funds at mid-life trade close to par. Funds with aging assets or uncertain prospects trade at steeper discounts. A buyer conducting due diligence on a portfolio of 40 fund stakes is underwriting uncertainty in bulk. The discount reflects that uncertainty.
GP-led secondaries: the continuation fund
The more recent innovation is the GP-led transaction. Instead of an LP selling their stake, the fund's general partner restructures the fund itself.
A GP-led secondary works like this: the sponsor creates a new vehicle called a continuation fund and moves one or more portfolio companies into it. Existing LPs get a choice. Take cash now, provided by a secondary investor, or roll your interest into the new vehicle and stay invested for the continued hold period.
Continuation fund transactions reached $63 billion in 2024, representing 84% of all GP-led secondary volume, per Jefferies. The appeal is direct. A sponsor with a strong portfolio company that is not ready for sale does not have to force an exit at the wrong time. They move the asset into a new structure, deliver liquidity to LPs who want out, and continue building value for those who stay.
For the portfolio company, the experience is usually seamless. The CEO still reports to the same sponsor. The operating plan continues. The capital structure may shift, but the people and the strategy stay in place. A well-run continuation fund is designed to be invisible to the operating team.
The numbers behind the market
Secondary market growth has outpaced nearly every institutional projection.
In 2021, total secondary volume hit approximately $132 billion, a record at the time. By 2024, it reached $162 billion per Jefferies, a 45% increase over 2023. In 2025, Lazard estimated total volume at $233 billion, up another 53%.
Secondary investor dry powder available for deployment hit $288 billion in 2024 per Pantheon's secondaries research. That capital is actively seeking deployment. Secondary buyers are not passive. They are capitalized, motivated, and competing for deals.
William Blair projects the market reaches $300 billion by 2030. Middle market GP adoption of continuation funds sits at approximately 30% penetration today, compared to around 70% for large-cap sponsors. That gap represents significant runway for growth in the lower middle market specifically.
Why the lower middle market matters here
Most secondary market volume by dollar size runs through large transactions. But the middle market is where the growth rate is concentrated.
William Blair's 2025 Secondary Market Survey found that most capital deployed in GP-led transactions in 2024 targeted the middle market and lower middle market. These deals offer secondary buyers attractive potential returns, lower entry valuations compared to large-cap transactions, strong GP alignment, and multiple exit pathways.
For LMM sponsors, continuation funds are becoming a real alternative to a forced sale. A business performing well but not yet at full value does not need to sell just because a fund approaches year 10. The continuation vehicle extends the runway without breaking the relationship between the operator and the sponsor.
For LMM investors evaluating PE fund commitments, the secondary market provides liquidity optionality that did not exist at scale a decade ago. If circumstances change, there is now a functioning marketplace to trade that exposure. The price varies. The option exists.
How deal structure intersects with secondary markets
If you are a business owner evaluating PE buyers, the fund timeline matters more than most operators realize.
A fund with two years left on its natural hold period has a different incentive structure than a fund with seven years of runway. A near-end fund needs to exit. They will force a sale at whatever the market will bear. A fund with time remaining has optionality to hold, build, and exit on its own terms.
Understanding a buyer's fund position is basic due diligence on your side of the table. Ask when the fund closed. Ask what the standard hold period is. Ask whether they have used continuation funds for other portfolio companies. The answers tell you whether they will push for a quick flip or genuinely partner for growth.
The secondary market reshapes this pressure. A fund approaching the end of its life can now run a continuation process rather than forcing a sale. That is better for the portfolio company, better for LPs who want to stay in, and better for the secondary investors who buy in at a defined entry point. The tool reduces the pressure that end-of-fund timelines historically created.
What LPs evaluating PE funds need to understand
Private equity has traditionally been the most illiquid asset class in institutional portfolios. That remains true in the primary sense. You commit capital for a long period. But the secondary market changes the risk calculation at the margin.
Knowing the secondary market exists, and what it would cost to access it, is part of underwriting a PE commitment. In normal conditions, LP-led stakes in buyout funds trade at an 87-cent-on-the-dollar range. In distressed periods, that discount widens. In strong markets, it narrows further.
For family offices and accredited investors considering LMM PE funds, secondary market accessibility has improved. More secondary funds are targeting middle market assets. More GPs are familiar with the continuation fund process. The friction of running a secondary transaction has dropped compared to where it was five years ago.
This does not make PE liquid. It makes PE less binary. You are not simply locked in until distributions arrive. You have an option, with a defined cost, to exit before the fund runs its natural course. Understanding that option is part of evaluating any LP commitment in private equity.
The one number that tells the story
In 2021, the secondary market hit $132 billion. In 2025, it hit $233 billion. In five years, volume grew 77%. During that same period, M&A volumes are still 52% below 2021 levels, and IPO activity is 79% below 2021 levels, per Jefferies.
The secondary market grew while every other liquidity pathway contracted. That is not coincidence. It is adaptation. Sponsors, LPs, and portfolio companies needed alternatives to public exits and strategic sales. The secondary market provided them.
The lower middle market is not immune to these forces. It is increasingly shaped by them. Operators and investors who understand how this market works will have more options when they need them. Those who ignore it will face forced timelines when circumstances shift.
Know the mechanics before the fund clock starts running out.
Frequently Asked Questions
What is the difference between LP-led and GP-led private equity secondaries?
LP-led secondaries occur when a fund investor sells their stake in a PE fund to a secondary buyer before the fund's natural end. GP-led secondaries occur when the fund's manager creates a new continuation vehicle and moves one or more portfolio companies into it. LP-led transactions give existing investors liquidity. GP-led transactions give the sponsor more time to build value while delivering a liquidity option to LPs who want out.
What discount do LPs typically accept when selling on the secondary market?
In 2024, buyout fund LP stakes sold at an average discount of 13.3% to net asset value, per Jefferies. Well-performing funds at mid-life trade closer to par. Distressed or aging funds trade at steeper discounts. The discount reflects the uncertainty a secondary buyer takes on when purchasing a stake they did not originally underwrite.
How does the secondary market affect business owners evaluating PE buyers?
The fund's timeline and secondary market access change how a PE buyer can behave. A fund near its end must force an exit whether the timing is ideal or not. A fund with secondary market options, including the continuation fund tool, can hold a business longer if it is not ready for sale. Business owners should ask about fund vintage, remaining hold period, and whether the buyer has run continuation transactions before agreeing to a deal.
How large is the private equity secondary market today?
Total secondary market volume reached $233 billion in 2025, per Lazard, up 53% from $152 billion in 2024. Secondary investor dry powder available for deployment hit $288 billion in 2024. The market is projected to reach $300 billion in annual volume by 2030, per William Blair's survey of secondary market participants.
