Private equity and private credit have long been valued for their ability to generate attractive returns, supported in part by the illiquidity premium, and incentive for tying up capital over extended time horizons.
But while this structure works well in stable environments, it can create tension when conditions shift, which they ultimately will. Investors need to rebalance portfolios, and meet capital obligations elsewhere, or access liquidity quickly. That is where the secondaries market comes into play and is a powerful strategy with its ability to offer flexibility, transparency and opportunity.
In recent years, secondaries have evolved from a tactical liquidity solution into a strategic entry point for private markets. Rather than committing capital to a blind pool at inception and waiting through the multi-year investment phase, secondaries allow investors to step into seasoned portfolios and often at a discount to NAV, with earlier distributions and better visibility into the underlying assets.
This is more than just a timing advantage. They mitigate the ‘J-curve’ that is common in primaries, shorten the duration of capital deployment, and deliver earlier diversification.
Investors can access high-quality portfolios already in motion, in even top-tier managers or funds that would otherwise be closed to new capital.
Asset consultancy firm Atchison outlines the structural differences between primary equity and secondaries, stating, “Primary funds typically deploy capital over three to five years and require commitments of 10-12 years. They involve blind pool risk and offer limited visibility into the portfolio for several years. In contrast, secondaries offer immediate exposure to existing portfolios and often achieve cash flow within the first 12-14 months.”
So, what’s driving the recent surge in secondaries activity? According to Atchison, the motivations are increasingly on both the supply and demand side. On the supply side: LP investors are using secondaries to reposition or free up capital in their private market portfolios, whilst GP-led transaction such as continuation vehicles are also allowing fund sponsors to hold on to assets for longer than the original acquisition underwriting planned.
On the demand side, J-curve mitigation, transparency of seasoned existing positions and a shorter expected hold period are all attractive qualities compared to more traditional primary private equity offerings. Not all secondary deals and managers are equal however, investors need to understand the use of leverage, performance fee crystallisation, basis of entry valuation and relative motivations of a given deal’s stakeholders.
The volume also supports this shift. The secondaries market transaction volume hit US$100 billion globally in the first half of 2025 according to Evercore, and is on track for a record year. The market’s depth and efficiency continues to grow, creating more pathways for investors to enter and exit with confidence.
There’s a growing recognition that secondaries can outperform primaries on a risk-adjusted basis. Several vintages of secondaries funds have delivered higher internal rate of return (IRRs) and better total value-to-paid-in (TVPI) metrics than traditional buyout funds.
While gross IRRs may appear more modest on paper, the shorter duration, faster DPI and reduced risk profile can translate into compelling outcomes for investors seeking capital efficiency.
Secondaries also fits well within modern portfolio construction. They provide instant diversification across managers, vintages, sectors, and geographies. They complement both core allocation and thematic satellite strategies.
For financial advisers and wholesale investors in Australia, secondaries offer a more accessible route into private markets, combining institutional-quality assets with a flexible structure more aligned to local portfolio needs.
This evolution is particularly relevant in Australia, where financial advisers and wholesale investors are increasingly looking for more sophisticated ways to access private markets.
In an environment marked by persistent inflation, tighter monetary policy, and reduced liquidity across traditional asset classes, secondaries offer a pragmatic solution for investors balancing long-term return objectives with shorter-term portfolio needs.
One of the strengths of secondaries is their ability to provide early data and clearer insight into underlying exposures. With more visible portfolio company performance and fund track records, advisers can make informed allocation decisions that are particularly important when managing portfolios on behalf of clients who may not be able to commit to blind pool strategies or long lockups.
The reduction in blind pool risk and faster time to distributions can enhance portfolio efficiency without compromising quality.
Recent growth in transaction volume also signals increasing relevance. This volume is being driven by a combination of LP portfolio sales and GP-led processes such as continuation vehicles. These trends reflect a broader shift in private market dynamics where investors are not just seeking liquidity but are actively managing private capital exposures with greater precision.
Another noteworthy development is the expansion of secondaries into adjacent segments like private credit and infrastructure. While private equity remains the core of the market, investors now have the option to build diversified exposures across a wider set of strategies, but through the secondary lens. This optionality is particularly useful for advisers seeking to manage risk while still accessing the return potential of alternatives.
In short, secondaries are supporting more deliberate and active portfolio construction. For Australian investors, they offer a credible means of accessing private markets in a way that better aligns with evolving risk, return and liquidity preferences.
It is though important to be clear-eyed about the risks. While secondaries offer earlier visibility, they’re still exposed to valuation shifts, liquidity constraints, and market volatility. Discounts to NAV don’t guarantee upside, and performance depends on asset selection, underwriting, and deal structuring. But for investors with the right horizon and appetite, secondaries can be a way to unlock liquidity without having to compromise on return expectations.
Ultimately, secondaries are no longer an afterthought or stopgap, they’re a deliberate and strategic tool for modern portfolios. They offer a way to turn illiquidity into advantage: to enter private markets with clarity, efficiency, and choice. As part of the market continues to mature, adviser and wholesale investors can expect the secondaries market to become an even more prominent feature of portfolio design.
