Why Now: The Case for Secondaries in 2026
A market at an inflection point
The global secondaries market has entered a new phase of scale, relevance, and structural durability. Once viewed as a niche liquidity solution, secondaries have become a core pillar of private markets. In 2025, transaction volume exceeded $200 billion1 for the first time, representing a milestone in the maturity of the asset class.2
This growth is not a temporary phenomenon. It reflects a structural shift in how Limited Partners (LPs) and General Partners (GPs) manage portfolios, liquidity, and risk. Alongside this shift, a combination of market forces is making 2026 an especially compelling moment for investors to allocate to secondaries. This article explores the dynamics driving the growth in secondaries, and how the current market environment is creating attractive opportunities for disciplined investors.
An undercapitalized market creating favourable supply–demand tailwinds
Fundraising for secondaries has scaled meaningfully, more than doubling over the past five years to reach approximately $160 billion in 2025.3 Yet the opportunity set has grown even faster, leaving the market significantly undercapitalized.
Importantly, a larger proportion of transaction volume during the year was from new buyers, demonstrating that interest in secondaries is also broadening. In 2023, new entrants comprised just 7% of transaction volume, at $8 billion. By 2025, volume from new entrants had quadrupled to $35 billion, representing 16% of total volume.
The capital overhang multiple – measured by dry powder relative to transaction volume – now sits at approximately 1.2×.4 This is well below the five-year average of 1.9× and even further below the buyout market’s overhang of 2.6×.5
A lower overhang signals a market where capital is scarce compared to the supply of opportunities, creating attractive conditions for investors with capital to deploy. With dry powder and transaction volume being roughly equal, investors can be selective about the opportunities they pursue committing only to the highest-quality opportunities most aligned with their strategy.
Secondary Market Annual Transaction Volume
(US$ Billion)
Source: Evercore Private Capital Advisory – 2025 Secondary Market Report, February 2026.
An all-weather strategy in a volatile market
Beyond favourable supply-demand dynamics, secondaries provide investors with a valuable source of diversification and low correlation exposure within a portfolio.
The macro backdrop in 2026 has remained volatile, marked by shifting policy dynamics, global conflicts, inflation, and ongoing interest-rate uncertainty. These factors have amplified investor caution across markets and are unlikely to abate in the near term.
Private equity is inherently procyclical. Fundraising, deal activity, and valuations often move in tandem with broader economic optimism. Secondaries, by contrast, tend to thrive in periods of volatility, dislocation, and uncertainty. In fact, secondaries demonstrate the lowest correlation to public markets across all private equity strategies as demonstrated in the table below. 6
Correlation of public assets vs private equity strategies, Q1 2006 to Q2 2025
| Global equities | Buyout | Buyout – mega | Buyout – large | Buyout – mid-size | Buyout – small | Growth | Fund of funds | Balanced | Secondaries | |
|---|---|---|---|---|---|---|---|---|---|---|
| Global equities | 1.00 | 0.71 | 0.69 | 0.74 | 0.63 | 0.47 | 0.68 | 0.53 | 0.60 | 0.29 |
| Buyout | 0.71 | 1.00 | 0.99 | 0.97 | 0.94 | 0.86 | 0.85 | 0.88 | 0.83 | 0.67 |
| Buyout – mega | 0.69 | 0.99 | 1.00 | 0.93 | 0.91 | 0.83 | 0.83 | 0.87 | 0.83 | 0.66 |
| Buyout – large | 0.74 | 0.97 | 0.93 | 1.00 | 0.90 | 0.85 | 0.85 | 0.84 | 0.77 | 0.62 |
| Buyout – mid-size | 0.63 | 0.94 | 0.91 | 0.90 | 1.00 | 0.88 | 0.82 | 0.86 | 0.78 | 0.71 |
| Buyout – small | 0.47 | 0.86 | 0.83 | 0.85 | 0.88 | 1.00 | 0.78 | 0.84 | 0.67 | 0.73 |
| Growth | 0.68 | 0.85 | 0.83 | 0.85 | 0.82 | 0.78 | 1.00 | 0.86 | 0.71 | 0.64 |
| Fund of funds | 0.53 | 0.88 | 0.87 | 0.84 | 0.86 | 0.84 | 0.86 | 1.00 | 0.75 | 0.82 |
| Balanced | 0.60 | 0.83 | 0.83 | 0.77 | 0.78 | 0.67 | 0.71 | 0.75 | 1.00 | 0.61 |
| Secondaries | 0.29 | 0.67 | 0.66 | 0.62 | 0.71 | 0.73 | 0.64 | 0.82 | 0.61 | 1.00 |
Source: Preqin Insights+, Aladdin, MSCI, Bloomberg. Data as of November 2025.
In the current environment, secondaries offer an attractive and differentiated entry point into private equity for the following reasons:
- Greater transparency and asset-level visibility – Unlike primary commitments to a private equity fund which are made on a ‘blind-pool’ basis, secondaries typically involve buying into an established company or portfolio of companies. Therefore, the underlying investments are known, and the performance history can be evaluated thoroughly in due diligence.
- Accelerated price discovery – Secondary transactions can reflect changing market conditions more quickly than primary funds. While primary investors enter portfolio companies at cost when the fund makes an investment, secondary buyers can price existing fund interests to reflect recent market dislocations or changes in sector valuations.
These features make a valuable countercyclical strategy within private market allocations. Across market cycles, they have demonstrated lower loss ratios, and smaller dispersion between top- and bottom-quartile managers.
Secondary investments – particularly LP-led secondaries – bring intrinsic diversification benefits, with a portfolio of funds offering potential downside protection through diversification across GPs, funds, companies, geographies, and vintages. In today’s environment, investing in variance reduction is a strategic necessity for investors.
Structural liquidity pressures will persist, even while distributions recover
Perhaps the most significant catalyst for the market’s evolution has been the muted exit environment of recent years, leading to protracted holding periods for private equity assets. The average holding period for assets has risen to approximately seven years, up from an average of five to six years between 2010 and 2021. 7
This has led to historically low distribution rates, well below the long-term average of ~20% of NAV.8 Notably, the current environment is more severe than during the global financial crisis of 2008 to 2009, with distributions lagging historical averages for four consecutive years – an unprecedented stretch in the modern private equity industry. 9
Global buyout distributions as a percentage of net asset value (NAV)
Source: MSCI.
Note: Buyout category includes buyout, balanced, co-investment, and co-investment multimanager fund types; 2007–24 as of year-end; 2025 represents the 12-month period from Q4 2024 to Q3 2025.
The result has been a prolonged ‘distribution drought’, pushing LPs to rethink liquidity management and turn to secondaries as a tool to reset exposures and rebalance portfolios. In 2025 alone, LP-led transactions reached approximately $120 billion – up 34% over the prior record in 2024.10 Notably, 40% of sellers were first-time participants in the secondaries market,11 suggesting that secondaries are becoming increasingly accepted by a broad base of investors.
The evolving role of secondaries is also evident in the evolving motivations of sellers. While 50% were driven by opportunistic liquidity needs and portfolio rebalancing, 25% were motivated by administrative clean-up, and 23% were reducing non-core strategies.12 The mindset of private equity investors has shifted from ‘commit and wait’ to ‘commit, monitor, and optimize’. Secondaries are an essential portfolio construction tool for LPs taking this approach.
Meanwhile, GP-led continuation vehicles (CVs) have increasingly become a mainstream exit pathway. In 2025, CVs accounted for 14% of sponsor-backed exit volume,13 demonstrating their role as a bona fide liquidity solution rather than a last-resort mechanism.
Importantly, reliance on secondaries has continued to increase even in stronger exit environments. Between 2014 and 2018, a period of robust M&A and IPO activity, secondary volume continued to grow steadily. Notably, 2021 was a record year for both M&A activity and CV volumes, demonstrating that their adoption is structural, not cyclical. The re-acceleration of traditional exits has reinforced, not displaced, GP-led usage of secondaries as a tool for enabling partial liquidity, duration management, and the ability to retain exposure to trophy assets. Secondaries have become structural features of the portfolio management playbook.
The scale of unrealized value reinforces how structural this liquidity challenge has become. Today, more than $3 trillion of capital remains locked in global buyout portfolios.14 Meanwhile, co-investment has increasingly become a priority for LPs, but their ability to drive co-investment depends on the size of their cheque to the most recent fund vintage. This has led to many LPs seeking to sell old exposures in order to re-commit at scale to their priority GPs.
Even as exit markets return to normal levels, it will take years, not quarters, for distribution levels to normalize. LP portfolio management needs, including rebalancing pressures from the denominator effect, alongside increasing GP demand for liquidity and portfolio solutions, are expected to continue driving activity in the secondary market. With secondaries now embedded as a valuable liquidity solution and portfolio management tool, we expect their usage to continue to grow.
A market poised for acceleration
The factors that drove the last decade of secondary market growth may evolve, but the structural role of secondaries within private markets is now firmly established. While significant capital is flowing into the asset class, the opportunity set remains vast, varied, and deep.
Current market conditions may present a differentiated entry point for certain investors seeking exposure to private equity assets.
- Structural liquidity demand remains strong – Looking ahead, slow exits, elongated funds, and the denominator effect will continue to drive secondary activity.
- Capital overhang is currently low compared to opportunities – Buyer capital remains well positioned relative to the supply of secondary opportunities.
- Volatility creates attractive entry points – As macro uncertainty continues and deepens, experienced buyers, with access to deals, will be well placed to benefit.
Taken together, these dynamics suggest that secondaries are moving from an opportunistic strategy to a core component of private markets portfolio construction.
For investors seeking high-quality private equity exposure with improved transparency, diversified risk, and attractive entry pricing, the current market environment may represent one of the most compelling entry points in the evolution of the asset class.
Endnotes:
- Evercore Secondary Market Highlights (2026), https://www.evercore.com/wp-content/uploads/2026/01/Evercore-2025-Secondary-Market-Survey_Highlights.pdf
- Market data is based on third-party sources believed to be reliable but has not been independently verified. Figures may reflect estimates and are subject to revision.
- Evercore
- Jefferies Global Secondary Market Review (2026), https://www.jefferies.com/insights/the-big-picture/2025-global-secondary-market-review-another-record-breaking-year/
- Jefferies
- Preqin Insights+, Aladdin, MSCI, Bloomberg. Data as of November 2025
- Bain – Global Private Equity Report
- MSCI Global Private Capital Benchmark Report, Q3 2025
- Bain – Global Private Equity Report
- Evercore
- Jefferies H1 2025 Global Secondary Market Review
- Jefferies H1 2025 Global Secondary Market Review
- KPMG / PEI, https://www.privateequityinternational.com/cvs-account-for-nearly-one-fifth-of-sponsor-backed-exits-kpmg-study/s
- Bain – Global Private Equity Report
This Article is for informational purposes only and does not constitute a general solicitation, offer or invitation in any Northleaf-managed funds in any jurisdiction and has not been prepared in connection with any such offer.