Secondary Markets in Growth Equity: 2025 Liquidity Revolution

The private equity secondary market has exploded. In the first half of 2025 alone, transaction volume surpassed $103 billion—a 51% increase year-over-year and the strongest six-month period on record. For growth equity investors, this liquidity revolution creates strategic opportunities that didn't exist just three years ago.

According to Jefferies' H1 2025 Global Secondary Market Review, LP-led transactions reached $45 billion while GP-led deals topped $58 billion, marking the first time GP-led transactions exceeded traditional LP sales. More importantly, pricing has strengthened significantly, with buyout portfolios trading at 94% of NAV and even venture-stage assets fetching 78% of NAV—up from 72% just six months earlier.

01The Maturation of Secondary Markets

Secondary markets have evolved from a distressed-asset dumping ground into a sophisticated liquidity mechanism serving multiple strategic purposes. Three factors have driven this transformation:

1. Institutional Acceptance

Pension funds, endowments, and sovereign wealth funds now view secondaries as a core portfolio management tool rather than a last resort. Nearly 80% of institutional LPs report using secondaries strategically to rebalance portfolios, access mature assets, or manage vintage year exposure.

2. GP-Led Transaction Innovation

General partners have discovered that continuation vehicles allow them to retain high-performing assets beyond traditional fund terms while providing liquidity to early investors. These transactions grew 68% year-over-year in H1 2025, with median holding periods extending from 7.2 to 9.4 years.

3. Data Transparency

Improved data infrastructure from platforms like Carta, EquityZen, and Forge has brought unprecedented pricing transparency to private markets. Real-time valuation data reduces information asymmetry and supports efficient price discovery.

"Secondary markets have become the pressure release valve that private equity needed—creating liquidity without forcing premature exits that destroy long-term value."

02Pricing Dynamics: The 2025 Landscape

Secondary pricing reflects a complex interplay of asset quality, portfolio maturity, and buyer demand. Here's what we're seeing across different asset classes:

Buyout Portfolios: Premium Territory

Mature buyout portfolios are commanding 94-96% of NAV, with some high-quality assets trading above NAV. Buyers recognize that these portfolios offer:

• Proven cash flow generation and operational stability
• Near-term exit visibility (12-24 month horizons)
• Lower execution risk compared to new investments
• Diversification across multiple portfolio companies

Growth Equity: The Sweet Spot

Growth equity secondaries trade at 85-90% of NAV depending on vintage and portfolio composition. Key pricing factors include:

• Vintage Year: 2020-2022 vintages command premiums due to attractive entry valuations
• Sector Mix: SaaS and healthcare-heavy portfolios trade 5-10 points higher than average
• Manager Quality: Top-quartile GPs can achieve NAV or slight premiums
• Exit Proximity: Portfolios with near-term liquidity events trade at discounts of only 5-8%

Venture Capital: Recovering Ground

Venture secondaries, which traded at 65-70% of NAV during the 2022-2023 correction, have rebounded to 78% of NAV as exit markets thaw. However, significant dispersion exists:

• AI-Focused Funds: Trading at 85-92% due to sustained buyer enthusiasm
• Late-Stage Crossover Funds: 70-75% given 2021 pricing concerns
• Early-Stage Deep Tech: 60-70% reflecting long duration to liquidity

03Strategic Uses of Secondary Markets

Smart investors deploy secondaries tactically across multiple scenarios:

Portfolio Rebalancing

LPs use secondaries to manage overallocation to private assets or specific sectors. As public markets rallied in 2024-2025, many institutional investors found themselves overweight private equity (the "denominator effect"). Selling selected secondary positions allows rebalancing without disrupting manager relationships.

Vintage Year Management

Buying secondary interests in older vintage funds provides immediate exposure to mature assets generating distributions. This complements primary commitments to newer vintages, creating a balanced "J-curve" profile that generates current income while building long-term value.

Manager Rotation

Secondaries enable LPs to exit underperforming GP relationships without waiting for fund maturity. With median holding periods now exceeding 9 years, the ability to monetize positions mid-life provides crucial portfolio flexibility.

Co-Investment Follow-On

For growth equity firms, buying secondary stakes in portfolio companies allows increased ownership in proven winners without requiring board consent for new primary rounds. This has become particularly attractive as fundraising cycles have elongated.

"The best use of secondary markets isn't selling losers—it's harvesting gains from winners while maintaining strategic exposure through continuation vehicles or co-investment."

04GP-Led Transactions: The New Norm

GP-led secondaries have fundamentally altered the private equity lifecycle. Rather than forcing exits at artificial fund termination dates, GPs can now offer existing LPs liquidity while retaining high-performing assets in continuation vehicles.

Structure and Mechanics

A typical GP-led transaction works as follows:

1. Portfolio Selection: GP identifies 1-3 high-quality assets worthy of extended holds
2. Valuation Process: Independent valuation establishes fair market value
3. LP Election: Existing LPs choose to either roll into the continuation vehicle or receive cash
4. New Capital: Secondary buyers and new LPs provide liquidity for selling LPs
5. Extended Hold Period: Continuation vehicle operates for additional 3-5 years

When GP-Led Transactions Make Sense

The best continuation vehicles share common characteristics:

• Exceptional Performance: Assets in top quartile with credible path to further value creation
• Extended Runway: Clear 3-5 year value creation roadmap (new product launches, geographic expansion, M&A)
• Alignment: Management teams committed to extended partnership with GP
• Market Timing: Unfavorable exit conditions make waiting strategic

Potential Conflicts and Mitigation

GP-led transactions introduce potential conflicts of interest—the GP is simultaneously selling to and buying from LPs while setting pricing. Best practices to mitigate conflicts include:

• Independent Valuation: Third-party valuation firms determine pricing
• LP Advisory Committee: Existing LPs approve transaction terms
• Competitive Process: Multiple buyers bid to establish market clearing price
• GP Co-Investment: GP commits meaningful additional capital alongside LPs

05Growth Equity Secondary Considerations

Growth equity assets present unique secondary market dynamics compared to buyout or venture:

Valuation Challenges

Growth companies typically don't generate the stable cash flows that support DCF valuation. Instead, pricing relies on revenue multiples compared to public comps—creating volatility based on market conditions. Secondary buyers must carefully assess:

• Revenue quality (NDR, gross retention, expansion rate)
• Path to profitability and cash flow generation
• Competitive positioning and market share trends
• Management team quality and stability

Liquidity Timelines

Growth equity investments typically hold for 4-6 years, creating a different secondary risk-return profile than shorter-hold buyouts or longer-duration venture. Buyers need to underwrite realistic exit scenarios 18-36 months out, considering:

• IPO window conditions for tech and healthcare
• Strategic buyer appetite in relevant verticals
• Private equity sponsor interest for take-privates
• Continuation vehicle potential for exceptional assets

Information Rights

Unlike buyout portfolios where buyers receive extensive data access, growth equity secondaries sometimes involve limited information rights—particularly for non-board LP positions. Buyers should negotiate for:

• Trailing 12-month financial performance
• Key operating metrics (revenue, gross margin, burn rate)
• Cap table and liquidation preference details
• Material contracts and customer concentration

06Pricing Optimization: Seller Best Practices

For LPs looking to monetize secondary positions, several strategies can maximize pricing:

1. Timing the Market

Secondary pricing follows cyclical patterns. Q4 is typically strongest as buyers deploy remaining dry powder before year-end. Post-earnings seasons (Q1, Q3) often see increased activity as updated valuations provide pricing confidence.

2. Portfolio Curation

Selling a curated portfolio of high-quality assets commands premiums versus dumping entire fund positions. Buyers pay up for cherry-picked exposure to best-in-class managers and companies.

3. Competitive Process

Running a structured auction with 8-12 qualified buyers creates competitive tension and price discovery. Single-buyer negotiations typically yield 3-5 points lower pricing than competitive processes.

4. Information Quality

Comprehensive data rooms with recent financials, operating metrics, and management presentations reduce buyer uncertainty and support tighter pricing. Insufficient information leads to wider discounts.

"In secondary markets, information asymmetry is the hidden tax that sellers pay. The more transparency you provide, the narrower the discount buyers require."

07The Buyer Perspective: Sourcing and Diligence

For secondary buyers, success depends on disciplined sourcing and rigorous diligence:

Deal Sourcing Strategies

• Intermediary Relationships: Top advisors (Lazard, Evercore, Campbell Lutyens) provide first-look access to quality deals
• Direct LP Relationships: Cultivating relationships with corporate pension funds and endowments generates proprietary flow
• GP Partnerships: Working directly with GPs on continuation vehicles or LP tender offers
• Platforms: Leveraging Forge, EquityZen, and similar platforms for smaller transactions

Due Diligence Priorities

Compressed timelines (4-6 weeks typical) require focused diligence on critical value drivers:

1. Portfolio Quality Assessment: Validate NAV marks through comparable company analysis and recent transaction multiples
2. GP Track Record: Analyze historical performance, value creation patterns, and exit execution
3. Liquidity Analysis: Model probability-weighted exit scenarios and timing
4. Legal Review: Examine fund terms, transfer restrictions, and tail-end liability

08Regulatory and Tax Considerations

Secondary transactions involve complex tax and regulatory issues that can impact pricing:

Tax Treatment

• Capital Gains: Most secondary sales trigger capital gains tax at time of transaction
• Recapture: Buyers acquire sellers' tax basis, which can create unexpected ordinary income recapture
• Withholding: Cross-border transactions may trigger withholding tax obligations
• UBTI Considerations: Tax-exempt buyers must evaluate unrelated business taxable income implications

Transfer Restrictions

Most fund agreements require GP consent for LP transfers. While consent is typically granted (GPs prefer qualified buyers to distressed sellers), the process can add 2-4 weeks to transaction timelines. Some GPs also reserve rights of first refusal or co-sale rights.

09Looking Forward: Secondary Market Trends

Several trends will shape secondary markets through 2026 and beyond:

Continued Volume Growth

Most forecasts project secondary volume reaching $200+ billion annually by 2027 as markets mature and LP portfolios age. The combination of $3+ trillion in private equity dry powder and ongoing denominator effect pressures ensures sustained demand.

Increased Retail Access

Platforms like Forge, Nasdaq Private Market, and Carta are expanding access to accredited individual investors. While still nascent, retail secondaries could eventually represent 10-15% of total volume.

AI-Powered Pricing

Machine learning models trained on millions of private transactions are improving price discovery and reducing information asymmetry. Expect real-time pricing for standardized secondary products within 3-5 years.

Tokenization and Blockchain

Blockchain-based transfer mechanisms could dramatically reduce transaction friction, settlement times, and costs. Several platforms are piloting tokenized LP interests with fractional ownership and instant settlement.

10Conclusion: Liquidity as Strategic Asset

The maturation of secondary markets represents a fundamental improvement in private equity's operating architecture. By providing liquidity mechanisms that don't require forced exits, secondaries enable longer holding periods, better timing of realizations, and more flexibility in portfolio management.

For growth equity investors specifically, secondaries create opportunities to access proven winners with reduced risk, harvest gains from mature positions while maintaining exposure, and provide employee liquidity that strengthens team retention and morale.

As secondary volumes continue growing and pricing mechanisms become more sophisticated, we expect these markets to evolve from specialized tools into core portfolio management infrastructure—creating a more efficient, flexible, and ultimately more valuable private equity ecosystem.

Nothing in this piece is investment, legal, tax or accounting advice, and nothing in it is an offer to sell any security. Fund I is offered only as stated on the Fund I page.