Key Takeaways
- • Private equity fund investors deployed $9 billion in structured secondary transactions in 2025, a 50% increase from $6 billion in 2024, as LPs seek liquidity alternatives amid prolonged distribution delays and extended holding periods for portfolio companies.
- • Structured secondaries—primarily preferred equity deals where buyers provide upfront capital in exchange for priority distribution rights until capital recovery and minimum returns are achieved—allow LPs to monetize aging fund positions without accepting discounts in traditional secondaries markets.
- • BlackRock's HPS credit funds, Goldman Sachs Asset Management equity and credit secondaries funds, and Carlyle AlpInvest (which acquired $600 million of Federated Hermes fund interests via preferred equity structure) are among major institutional participants driving demand.
- • Family offices and insurance investors are increasingly utilizing these structures alongside traditional secondary buyers, preferred equity specialists, and private credit managers, indicating broadened institutional adoption.
- • Jefferies anticipates continued growth in structured secondaries activity during 2026 as reduced distributions from buyout funds persist and LPs explore standalone secondary sales of co-investments as additional liquidity mechanisms.
Summary
Private equity limited partners have increasingly turned to structured secondary transactions as a mechanism to generate liquidity from maturing fund portfolios, with deal volumes reaching $9 billion in 2025—a substantial 50% increase from $6 billion in 2024. According to data compiled by Jefferies and reported by the Financial Times, this shift reflects a fundamental challenge facing institutional investors: extended holding periods for portfolio companies and a multi-year slowdown in distributions from buyout funds have constrained cash returns at precisely the moment when LPs require liquidity.
Rather than liquidating fund stakes in the traditional secondaries market at potential discounts, institutional investors are increasingly adopting structured transactions that preserve upside while unlocking near-term cash. The primary mechanism driving this activity is the preferred equity deal structure, wherein a buyer provides immediate capital to the LP in return for priority claims on future fund distributions until the buyer recovers its principal and achieves a contractually defined minimum return. The original LP retains most or all remaining upside from the underlying portfolio companies, creating a mutually beneficial transaction that avoids fire-sale dynamics.
The institutional composition of this market reflects the diversity of LP bases seeking liquidity solutions. Family offices and insurance companies have emerged as active participants, alongside traditional secondary buyers, specialized preferred equity firms, and private credit managers who view distribution-backed structures as attractive risk-adjusted investments. Major capital allocators including BlackRock's HPS credit platform, Goldman Sachs Asset Management's secondaries funds, and Carlyle AlpInvest have been particularly active; notably, Carlyle AlpInvest completed a $600 million preferred equity acquisition of fund interests from Federated Hermes in 2025, exemplifying the scale and institutional credibility of these transactions.
Jefferies projects continued expansion of structured secondaries activity throughout 2026 as the structural headwinds driving current demand—namely, extended portfolio company holding periods and sustained distribution constraints—remain unresolved. Additionally, LPs have begun increasing standalone secondary sales of co-investments, where institutional investors hold direct equity stakes alongside PE funds, further diversifying liquidity levers beyond traditional fund-level transactions.
Rather than liquidating fund stakes in the traditional secondaries market at potential discounts, institutional investors are increasingly adopting structured transactions that preserve upside while unlocking near-term cash. The primary mechanism driving this activity is the preferred equity deal structure, wherein a buyer provides immediate capital to the LP in return for priority claims on future fund distributions until the buyer recovers its principal and achieves a contractually defined minimum return. The original LP retains most or all remaining upside from the underlying portfolio companies, creating a mutually beneficial transaction that avoids fire-sale dynamics.
The institutional composition of this market reflects the diversity of LP bases seeking liquidity solutions. Family offices and insurance companies have emerged as active participants, alongside traditional secondary buyers, specialized preferred equity firms, and private credit managers who view distribution-backed structures as attractive risk-adjusted investments. Major capital allocators including BlackRock's HPS credit platform, Goldman Sachs Asset Management's secondaries funds, and Carlyle AlpInvest have been particularly active; notably, Carlyle AlpInvest completed a $600 million preferred equity acquisition of fund interests from Federated Hermes in 2025, exemplifying the scale and institutional credibility of these transactions.
Jefferies projects continued expansion of structured secondaries activity throughout 2026 as the structural headwinds driving current demand—namely, extended portfolio company holding periods and sustained distribution constraints—remain unresolved. Additionally, LPs have begun increasing standalone secondary sales of co-investments, where institutional investors hold direct equity stakes alongside PE funds, further diversifying liquidity levers beyond traditional fund-level transactions.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.