Private Markets and Secondaries: The New Liquidity of Sophisticated Capital

For years, one of the basic rules of private markets was accepting illiquidity. Anyone entering private equity, venture capital, private real estate, infrastructure or alternative funds knew that capital stayed committed for years. The potential reward was tied precisely to that patience: less liquidity, higher expected premium.

That rule hasn't disappeared. But it's changing.

Secondary markets are transforming how investors, sponsors, managers and wealthy families think about liquidity. Lazard estimated the secondary market grew strongly in 2025, reaching a traded volume of roughly USD 233 billion, with GP-led and LP-led transactions at very similar levels. That figure isn't just a market data point. It's a sign of maturation.

When an asset class develops deeper mechanisms for transferring positions, creating liquidity and reordering portfolios, it stops being a closed compartment. It starts behaving like a more flexible architecture.

My reading is that secondaries are turning illiquidity into a negotiable variable.

To understand it, you have to separate two worlds. In an LP-led transaction, an investor sells their stake in a fund before natural maturity. They may do so due to liquidity needs, rebalancing, strategy shifts, distribution pressure, or simple portfolio management. In a GP-led deal, the manager drives a solution to provide liquidity to existing investors or extend the life of assets they still consider valuable. Both structures respond to the same problem: the asset's timeline doesn't always match the investor's timeline.

That mismatch is one of the great tensions in private capital.

An asset may need seven, ten or twelve years to mature. A family may need liquidity sooner. A fund may hold good assets, but investors tired of waiting for distributions. A manager may believe selling now destroys value. An LP may want to free up capital for new strategies. The secondary market appears as a valve: it doesn't eliminate illiquidity, but it allows it to be managed.

Bain notes that, although exits and exit value improved in 2024, distributions as a share of NAV fell to low levels from a decade-plus perspective. This point is central. Many investors haven't stopped believing in private equity. What they feel is congestion. Trapped capital. Funds that take time to return. New commitments competing with old, still-unrealized assets.

In that context, liquidity becomes strategic.

For wealthy clients, this has several implications. The first is that accessing private markets requires understanding not only the investment thesis, but also the exit route. A fund can be excellent and still be unsuitable for a client who will need liquidity in five years. An asset can have potential and still be problematic if no reasonable secondary market exists. A semi-liquid structure may seem comfortable, but must be analyzed carefully: promised liquidity doesn't always mean guaranteed liquidity.

The second implication is that secondaries can offer opportunities, not just exits. Buying secondary positions allows entry into more mature portfolios, with greater visibility into underlying assets and shorter expected duration. But it also demands discipline. An attractive discount can hide quality problems, portfolio saturation, seller distress, or overly optimistic assumptions about future exits.

The third implication is reputational and governance-related. In private markets, information is less transparent than in public markets. That's why manager selection, document review, investor rights, fee structure, liquidity windows, gates, and reporting quality carry much more weight. In private markets, the contract is part of the asset.

For a wealth advisor, the conversation can't be reduced to “enter or don't enter” private equity. It must be more precise: what percentage of wealth can remain illiquid? For how long? With which managers? In which vintage? In which jurisdiction? In which currency? With what reporting? With what exit rights? With what tax impact? With what relationship to the total family structure?

Sophisticated capital doesn't just buy expected returns. It buys design.

The expansion of private access also brings risks. As alternative products reach wealth management channels, more investors gain access to strategies once reserved for institutions. That can be positive if it improves diversification and access. But it can be dangerous if illiquidity is sold to clients who don't understand its real cost. The fact that an asset class is institutional doesn't mean it's suitable for everyone.

The industry has a temptation: to present private markets as a solution superior to public markets. That narrative is too simple. Private markets can offer opportunity, control, value creation and lower exposure to daily volatility. But they can also hide slow valuations, lack of liquidity, less transparency, high fees, conflicts of interest, and strong manager dependency.

My view is that private markets shouldn't be idealized. They should be structured.

The wealthy investor must enter with a clear policy: how much capital can be committed, what horizon is accepted, what level of information is required, what concentration is tolerated, what minimum liquidity is needed, and what role private assets play within the whole. Investing for generational growth is not the same as investing for income, preservation, diversification, or opportunistic access.

Secondaries add an interesting layer because they allow private capital to be thought of less rigidly. But they don't turn illiquid into liquid by magic. They create markets, not certainties. And like any market, they depend on price, depth, demand, asset quality and macro conditions.

Sophistication lies in understanding that difference.

In a world of shifting rates, selective IPOs, uneven M&A, artificial intelligence, infrastructure, the energy transition, and liquidity pressure on institutional portfolios, secondary markets will likely keep gaining importance. Not as an accessory, but as a core part of the private ecosystem.

For the UHNWI or family office client, the conclusion is clear: liquidity should no longer be thought of at the end of the investment. It must be designed at the outset.

Illiquidity can be a source of return. But only if it's properly sized. When misunderstood, it becomes a trap.

Smart private capital doesn't seek to eliminate patience. It seeks to give patience structure.

— R. B.