Key Takeaways
- • Private markets hold over $10 trillion in assets across PE, real estate, infrastructure, and credit, but illiquidity remains a structural constraint limiting broader investor participation and exit opportunities.
- • Secondary market deal volume reached $112 billion in 2023 following a 2022 dip, with H1 2026 recording $121 billion in PE secondaries transactions as an IPO slowdown forces investors to seek alternative liquidity channels.
- • Lexington Partners closed a $22.7 billion secondaries-focused fund in Q1 2024—the largest fund complex ever raised for secondaries investing—signaling institutional conviction in market maturation and sustained demand.
- • The ongoing IPO slowdown has created an exit bottleneck for portfolio companies and limited partners, with high financing costs and depressed exits straining private equity's traditional illiquidity premium and driving secondary market adoption.
- • Secondaries transactions remain complex due to limited public disclosure of company information and valuation challenges, though market participation is expanding beyond traditional $5–25 million LP minimum commitments as the sector democratizes.
Summary
Private markets continue to expand, with cumulative holdings exceeding $10 trillion across private equity, real estate, infrastructure, and credit assets. However, this substantial asset base faces a critical friction point: scant liquidity relative to portfolio complexity. Illiquidity has long been cited as a key barrier to even greater private asset investing, yet a structural shift is underway as investors increasingly turn to secondary markets to unlock capital without waiting for traditional exit events.
The secondary market has experienced significant momentum in recent years. Following a contraction in 2022, secondary deal volume rebounded to $112 billion in 2023, with particularly strong activity in the latter half of that year as improved valuations attracted sellers. This growth trajectory accelerated further into 2026, with PE secondaries recording $121 billion in the first half of that year alone. Market observers assess the secondary market as well-positioned for continued expansion, supported by sustained liquidity demand across private markets.
The primary driver of secondaries growth is the prolonged IPO slowdown, which has created a bottleneck for traditional exit channels. Portfolio companies and limited partners seeking liquidity increasingly lack conventional paths, particularly given elevated financing costs and depressed exit valuations. This dynamic has repositioned 2026 as a seller's market relative to conditions two years prior, providing LPs with meaningful pricing power when accessing liquidity from their private equity holdings.
Secondary-focused fund vehicles have grown dramatically in both number and size, reflecting institutional confidence in the market's durability. Lexington Partners' Q1 2024 close of a $22.7 billion fund represents the largest fund complex ever raised specifically to invest in secondaries, underscoring how the asset class has evolved from a niche segment into a material component of the alternative asset landscape. Additionally, participation is expanding beyond traditional institutional boundaries—historically, secondary funds required LP commitments of $5–25 million, but this landscape is shifting to accommodate a broader investor base.
Operational complexity remains a meaningful factor constraining secondary market growth. Secondary transactions are difficult to underwrite due to limited public disclosure of portfolio company information, making valuations inherently challenging. Industry estimates suggest a $250 billion secondary market remains achievable within the next several years, contingent on continued maturation of sourcing capabilities and transaction execution infrastructure.
The secondary market has experienced significant momentum in recent years. Following a contraction in 2022, secondary deal volume rebounded to $112 billion in 2023, with particularly strong activity in the latter half of that year as improved valuations attracted sellers. This growth trajectory accelerated further into 2026, with PE secondaries recording $121 billion in the first half of that year alone. Market observers assess the secondary market as well-positioned for continued expansion, supported by sustained liquidity demand across private markets.
The primary driver of secondaries growth is the prolonged IPO slowdown, which has created a bottleneck for traditional exit channels. Portfolio companies and limited partners seeking liquidity increasingly lack conventional paths, particularly given elevated financing costs and depressed exit valuations. This dynamic has repositioned 2026 as a seller's market relative to conditions two years prior, providing LPs with meaningful pricing power when accessing liquidity from their private equity holdings.
Secondary-focused fund vehicles have grown dramatically in both number and size, reflecting institutional confidence in the market's durability. Lexington Partners' Q1 2024 close of a $22.7 billion fund represents the largest fund complex ever raised specifically to invest in secondaries, underscoring how the asset class has evolved from a niche segment into a material component of the alternative asset landscape. Additionally, participation is expanding beyond traditional institutional boundaries—historically, secondary funds required LP commitments of $5–25 million, but this landscape is shifting to accommodate a broader investor base.
Operational complexity remains a meaningful factor constraining secondary market growth. Secondary transactions are difficult to underwrite due to limited public disclosure of portfolio company information, making valuations inherently challenging. Industry estimates suggest a $250 billion secondary market remains achievable within the next several years, contingent on continued maturation of sourcing capabilities and transaction execution infrastructure.
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