Secondary
Private Equity glossary · Private Equity Fundamentals
Definition
A transaction in previously-issued partnership interests (LP secondary) or portfolio-company stakes (GP-led continuation vehicle, strip sale, tender offer). The secondary market has grown from a niche to $100-150 billion in annual volume, split roughly 50-50 between LP-led and GP-led transactions by 2025. LP interests typically trade at 3-30% discount to NAV depending on strategy, vintage, and market conditions (buyout: 3-8% in strong markets, 20-30%+ in stressed). Secondary buyers underwrite by re-valuing portfolio companies bottom-up and discounting projected cash flows at 15-25% target IRR.
Secondary in plain English
When you put money into a PE fund, you normally can't get it back for many years — your money is locked up. The "secondary" market is where people buy and sell those locked-up positions early, so an investor who needs cash out doesn't have to wait. It's like season tickets you can't cancel: a secondary buyer purchases your seats off you, usually at a discount to their face value. These stakes trade below their official reported worth (NAV, or net asset value) — a small 3-8% discount in good times, but 20-30%+ when markets are scared — and buyers decide their offer by re-estimating what each company inside the fund is really worth. This used to be a tiny corner of finance and is now huge, roughly $100-150 billion changing hands a year.
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