History of the secondaries market
Secondaries have become an increasingly important part of private markets. What began as a relatively small and specialized strategy has evolved alongside the growth of private equity, helping investors actively manage portfolios and providing greater flexibility across long-term investments.
In this video, David Rubenstein explores how the secondaries market developed over time, the events that accelerated its growth, and the expanding role it plays for investors and private equity managers.
The History of the Secondaries Market
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Key themes
The emergence of secondaries
Private equity has historically been built around long-term investment funds, often with an investment horizon of approximately ten years. While this structure allowed managers to create value, it also limited investors' ability to access liquidity before investments were realized.
As institutional investors increased their allocations to private markets, the need for greater portfolio flexibility also grew. Secondaries provided investors with additional options to rebalance portfolios or access liquidity before a fund reached the end of its life.
The early days
During the 1980s and 1990s, the secondaries market was relatively small, with transactions typically bespoke and bilaterally negotiated. Investors primarily bought and sold existing limited partner interests, often at meaningful discounts to net asset value.
These transactions sought to benefit both buyers and sellers. Sellers gained earlier access to liquidity, while buyers acquired more mature private equity portfolios with greater visibility into the underlying assets.
Over time, these transactions established the foundation for today's institutional secondaries market.
Institutional adoption
Several market events accelerated the development of secondaries.
Following the technology downturn in the early 2000s, some investors sought to reduce exposure to venture capital and private equity commitments. The global financial crisis later reinforced the importance of portfolio liquidity as some investors became overallocated to private markets following declines in public equity values.
Regulatory changes contributed to market growth by increasing the supply of secondary transactions.
Together, these developments helped shift secondaries from being viewed primarily as distressed transactions to becoming an increasingly utilized portfolio management tool.
The rise of continuation funds
Over the past decade, the market has continued to evolve through the growth of continuation funds and other GP-led transactions.
These structures allow private equity managers to transfer one or more portfolio companies into newly formed investment vehicles, giving existing investors the option to receive liquidity or continue participating in the investment.
Continuation funds have expanded the role of secondaries beyond traditional limited partner transactions by providing managers with additional flexibility around ownership duration and exit timing.
"What began as primarily a liquidity solution increasingly became a broader portfolio management and capital formation tool for both investors and managers."
David Rubenstein
Looking ahead
Private markets continue to evolve as companies remain private longer and investors seek greater flexibility across long-duration investments.
Secondaries have expanded beyond traditional private equity into areas such as private credit and infrastructure, while new liquidity solutions continue to emerge.
Although secondaries still represent a relatively small portion of overall private market assets, many market participants believe the market may continue to grow as investor adoption broadens and portfolio management becomes increasingly active.
Understanding the history of secondaries provides important context for how private markets continue to evolve and why liquidity solutions have become an increasingly important part of long-term investing.
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