For decades, the private equity model was conceptually straightforward. A sponsor acquired a business, improved it, held it for several years and then exited through one of a small number of recognizable channels: a strategic sale, a sponsor-to-sponsor transaction or an IPO. The realization event mattered because it converted an illiquid valuation into cash, returned capital to limited partners and provided the distributions needed to support the next fundraising cycle.

That model has become considerably less linear. Years of slower distributions, longer holding periods and selective traditional exit markets have pushed sponsors and LPs toward an increasingly sophisticated secondary market. What began primarily as a venue for LPs seeking to sell fund interests has evolved into a broader liquidity infrastructure encompassing continuation vehicles, portfolio sales, structured transactions and increasingly large pools of dedicated secondary capital. By June 2026, Lazard estimated trailing-twelve-month secondary transaction volume at roughly $260 billion, double the market's 2021 level. First-half 2026 volume alone reached a record $124 billion.

The more important development, however, is not simply the market's size. It is what that size represents. Private equity increasingly has the ability to generate liquidity without fully transferring an underlying company out of the private equity ecosystem. A sponsor can move an asset into a continuation vehicle, allow existing investors to cash out, bring in a new group of secondary investors and continue owning the business. LPs can sell fund interests rather than wait for the underlying portfolio companies to exit. Minority sales and structured solutions can generate distributions without requiring a complete realization.

This is turning secondaries into something closer to a parallel exit market: a system that separates the provision of liquidity from the ultimate sale of the underlying business.

The first sign of structural change is capital formation. Investors are not merely using secondaries more frequently; they are allocating increasingly large pools of capital specifically to the strategy.

S&P Global data shows private equity secondaries fundraising reached $92.9 billion in 2025, up 6.4% from $87.3 billion in 2024 and the highest annual amount since at least 2020. That strength stands in contrast with broader private equity fundraising, which fell 11% in 2025. Through the first half of 2026, secondaries strategies had already raised approximately $51 billion, putting the segment on course to potentially exceed the prior year's record.

The quarterly fundraising pattern is uneven, as large fund closes can create significant spikes, but the direction is unmistakable. The asset class is becoming institutionalized. Large pension funds, sovereign wealth funds, insurers and other investors increasingly treat secondaries not merely as opportunistic distressed exposure but as a dedicated allocation within private markets.

Several characteristics make that allocation appealing. Secondary buyers typically acquire more mature assets than primary fund investors, potentially reducing blind-pool risk and shortening the J-curve. Investors can often observe portfolio companies before committing capital, construct diversified exposures across managers and vintages, and potentially acquire those interests at discounts to reported NAV. More fundamentally, secondaries provide something private markets have historically lacked: an organized mechanism for intermediate liquidity and price discovery.

Fundraising is therefore both a response to transaction growth and one of its enablers. More capital allows larger deals to clear, which makes the market relevant to larger sellers and sponsors, which in turn creates more transaction volume.

That feedback loop is beginning to resemble the development of permanent market infrastructure.

The size of funds currently raising capital illustrates how far the industry has moved from its niche origins. Lexington Partners is seeking $25 billion for Lexington Capital Partners XI, Blackstone is targeting $22.5 billion for Strategic Partners X, and HarbourVest is seeking $20 billion for Dover Street Fund XII. Several more vehicles are targeting between $5 billion and $8 billion.

The significance extends beyond absolute fund size. The strategies represented in the fundraising pipeline increasingly span both LP-led and GP-led transactions. The same institutions that historically purchased discounted LP interests are now building capabilities around continuation vehicles, structured liquidity and direct asset underwriting.

S&P Global notes that Ardian closed a $30 billion secondary fund in 2025, making it the largest private equity secondaries fund raised at the time. Meanwhile, approximately 45% of LPs surveyed by Goldman Sachs were reportedly still below their target allocation to private equity secondaries, suggesting that institutional penetration may have further room to grow.

This matters because one of the principal historical constraints on the secondary market was buyer capacity. Large LP portfolios or multi-billion-dollar GP-led transactions could overwhelm individual funds. A larger and more diversified buyer base changes that calculus.

Evercore estimates secondary-market dry powder at approximately $215 billion entering 2026, alongside another $218 billion targeted for near-term fundraising. Although actual transaction capacity depends on leverage, recycling and co-investment, the scale of capital available means secondary transactions can increasingly compete with traditional buyers for meaningful portfolios and high-quality individual assets.

Secondaries are no longer merely absorbing assets that cannot find another buyer. They increasingly represent a viable competing route to liquidity.

The expansion in transaction volume makes the structural shift particularly clear.

According to Lazard, secondary transaction volume increased from approximately $75 billion in 2018 to $152 billion in 2024 and then $233 billion in 2025. Trailing-twelve-month volume through June 2026 reached $261 billion, while first-half activity alone totaled $124 billion. Lazard expects full-year 2026 volume to reach approximately $275 billion.

Even more important is the composition.

In 2018, GP-led transactions accounted for only around 32% of secondary volume. By 2020 they represented half. In 2025, Lazard estimates GP-led transactions at $116 billion, virtually equal to the $117 billion LP-led market. First-half 2026 maintained the balance, with $61 billion of GP-led volume versus $63 billion of LP-led transactions.

This convergence is essential to the parallel-exit thesis.

Traditional LP-led secondaries provide liquidity at the fund-interest level. An institution that committed capital seven years earlier can sell its position rather than wait for every portfolio company to be realized. Ownership of the companies does not change directly; ownership of the fund interest does.

GP-led secondaries go further. They create an alternative realization mechanism at the asset level. A sponsor can transfer one or more portfolio companies from an existing fund into a new continuation vehicle. Existing LPs typically receive the choice to cash out or roll their exposure into the new structure, while new secondary investors provide the capital that finances the transaction.

Economically, liquidity has occurred. But operationally, the GP may still own and control the company.

That is very different from the conventional definition of an exit.

One of the strongest arguments that secondaries have become structural rather than merely cyclical is that their growth has continued even as M&A and IPO markets have improved.

Lazard notes that first-half 2026 secondary activity reached record levels even as overall M&A volume surpassed its 2021 peak and IPO issuance rebounded. The distinction is that the recovery in traditional exit markets has remained uneven. Large strategic transactions have driven much of the improvement, while sponsor-backed M&A has not recovered to the same degree.

S&P Global counted 1,504 PE and venture exits in the first half of 2026, down 6% from 1,601 in the comparable 2025 period. Exit value appeared much stronger, but it was heavily distorted by a small number of exceptional transactions.

HarbourVest reaches a similar conclusion. It argues that aggregate exit activity has improved, but cash distributions remain well below historical norms relative to total private-market NAV. The industry has accumulated considerably more assets than it has been able to monetize through traditional channels. As a result, an improving M&A market does not automatically resolve the industry's liquidity imbalance.

That helps explain why the secondary market is continuing to scale despite a better conventional exit backdrop.

Sponsors are no longer choosing between “sell the company now” and “wait.”

They increasingly have a third option:

manufacture liquidity while retaining the asset.

A parallel market cannot scale without counterparties, and the secondary buyer universe is broadening rapidly.

Evercore estimates that established investors deployed approximately $191 billion into secondaries during 2025, compared with roughly $35 billion from newer entrants. That is a substantial change from 2023, when new entrants represented just $8 billion of approximately $114 billion in deployment.

More strikingly, Evercore estimates current dry powder at roughly $215 billion, including $46 billion held by newer entrants. That implies more than one-fifth of available secondary capital now comes from investors that were not established participants only a few years ago.

The expansion of the buyer universe has several implications.

First, competition for higher-quality assets can support stronger pricing. Second, specialist capital can develop around narrower strategies, sectors and transaction structures. Third, sponsors gain confidence that increasingly large continuation transactions can be syndicated across a deep buyer base rather than relying on a handful of dominant institutions.

Lazard also highlights the growing participation of evergreen and '40 Act vehicles, which can supply additional capital to GP-led deals. Its 2026 investor survey found 40% of respondents managing evergreen or '40 Act products, while approximately $77 billion of dry powder was earmarked specifically for GP-led deployment in the second half of 2026—more than the entire GP-led volume completed during the first six months of the year.

The market's constraint is therefore shifting. The question is increasingly less about whether secondary capital exists and more about which assets meet investors' underwriting requirements.

The clearest evidence of a parallel exit system is the rise of continuation vehicles.

Evercore estimates GP-led secondary volume increased from $48 billion in 2022 to $106 billion in 2025. Within that total, single-asset continuation vehicles expanded from $20 billion to $52 billion, while multi-asset continuation vehicles grew from $19 billion to $42 billion. Together, the two formats represented roughly $94 billion of GP-led activity in 2025.

S&P and Preqin data tell the same story through fundraising. Private equity continuation funds raised approximately $62.7 billion in 2025 across 105 vehicles, both eight-year highs.

The attraction is straightforward.

A high-performing asset may reach the end of its original fund's natural holding period before the sponsor believes its value-creation plan is complete. Selling the company can satisfy LP liquidity demands but sacrifice potential upside. Holding it longer can preserve upside but frustrate investors who need distributions.

A continuation vehicle attempts to solve both problems simultaneously.

Existing investors gain a liquidity option. The sponsor retains control. New investors acquire exposure to an already seasoned asset. The original fund records a realization. Yet the business itself may remain under the same GP.

This is why continuation vehicles should increasingly be analyzed alongside IPOs, strategic acquisitions and sponsor-to-sponsor sales when discussing exit optionality.

HarbourVest estimates GP-led transactions represented roughly 5% of PE exits in 2020 but 14% by the first half of 2026. That is a remarkable increase in a relatively short period and suggests secondary liquidity is taking a growing share of the realization toolkit.

But continuation vehicles also introduce a fundamental tension: the GP is effectively sitting on both sides of the transaction.

The sponsor wants an attractive price for selling LPs, while also wanting an attractive entry valuation for the new continuation vehicle. That raises questions around valuation, conflicts, competitive sale processes and alignment. The more central CVs become to the exit system, the more important governance standards become.

Private equity buyout remains overwhelmingly dominant, representing approximately 77% of transaction volume in Evercore's data. Private credit accounts for another 11%, with real estate and infrastructure each around 4%, venture capital at 3% and energy at 1%.

That concentration is logical. Buyout is the largest and most mature private-market ecosystem, and its combination of long-duration assets, institutional LPs and sizable sponsor-controlled portfolios creates ideal conditions for secondary transactions.

Yet the smaller categories are strategically important because they show that the underlying mechanism is portable.

HarbourVest estimates infrastructure secondary volume increased from approximately $13 billion in 2021 to $20 billion in 2025, while private credit secondaries expanded from roughly $4 billion to $20 billion over the same period.

The implication is that the secondary market is evolving from a private equity subsector into liquidity infrastructure for private assets generally.

As private markets continue to absorb assets traditionally financed or traded publicly, the need for mechanisms that facilitate portfolio rebalancing, price discovery and ownership transfer becomes more significant. The deeper private markets become, the more valuable a functioning secondary market becomes.

The most consequential change is conceptual.

Historically, a private equity fund generally produced meaningful liquidity by selling its companies. Liquidity and ownership transfer happened simultaneously.

The modern secondary market increasingly separates those two events.

An LP can sell its fund interest while the underlying companies stay exactly where they are. A GP can sell a business from Fund IV to a continuation vehicle while continuing to control it. A sponsor can sell a minority position while maintaining control. Structured transactions can generate liquidity against portfolio assets without requiring outright disposal.

This creates a continuum rather than a binary choice between held and exited.

That flexibility may prove particularly important given the inventory accumulated during the low-rate years. S&P has cited industry estimates of roughly 13,000 sponsor-backed companies still awaiting exits, while average holding periods have risen across several major sectors. Industrials, for example, increased from an average 5.5-year holding period in 2020 to 7.5 years by mid-2025. Healthcare climbed from 5.2 to 6.4 years.

Secondaries cannot eliminate the need to eventually realize underlying enterprise value. But they can redistribute who is willing to wait.

That is precisely what an effective market does.

The growth of secondaries does not mean every transaction represents healthy liquidity.

A continuation vehicle can be an effective tool for retaining an exceptional asset whose value-creation runway exceeds the life of the original fund. It can also become a mechanism for avoiding a difficult price discovery process.

That distinction matters.

When a third-party strategic acquirer purchases a company, the transaction provides external validation of enterprise value. When the asset moves from one GP-controlled vehicle to another, valuation relies heavily on the integrity of the secondary process, competing bids and governance safeguards.

The industry may now be entering another phase altogether. Lazard identifies continuation-fund-to-continuation-fund transactions as an emerging structural tool. In other words, an asset already transferred once into a continuation vehicle can potentially be transferred again rather than conventionally exited.

That raises a provocative question for LPs:

How many liquidity events can occur before the underlying asset actually exits?

The answer is not necessarily that multiple continuation transactions are problematic. A high-quality business can reasonably remain attractive through successive ownership structures. But repeated internal transfers make transparency around valuation, fees, carry resets and sponsor economics increasingly important.

The maturation of secondaries therefore creates both liquidity innovation and governance complexity.

Secondaries were once described primarily as a solution for investors who needed liquidity before a fund matured. That description is now too narrow.

The market has become an increasingly central part of private equity's financial architecture. Transaction volume has reached $260 billion on a trailing-twelve-month basis. GP-led and LP-led markets are approximately equal in scale. Dedicated fundraising is setting records. Continuation vehicles are absorbing a growing share of private equity realizations. New buyers are entering the market, and secondary strategies are spreading into private credit, infrastructure and other asset classes.

Most importantly, the market now allows private equity to solve two problems that were historically inseparable.

Who owns the asset?

and

Who needs liquidity today?

Those questions no longer need to have the same answer.

That makes secondaries more than another investment strategy. They are becoming the mechanism through which an increasingly large private-market ecosystem manages duration, reallocates ownership and generates liquidity without depending exclusively on public markets or strategic acquirers.

The classic private equity model was:

Buy → Improve → Sell → Distribute.

The emerging model is more flexible:

Buy → Improve → Recapitalize / Transfer / Partially Sell → Continue Holding → Ultimately Exit.

Traditional exits will remain essential. A strategic acquisition or IPO still provides the clearest final realization of value. But the rise of secondaries means private equity firms and investors no longer have to wait for that final event to create liquidity.

Evercore. (2026). 2025 Secondary Market Report. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.evercore.com/wp-content/uploads/2026/02/Evercore-PCA-2025-Secondary-Market-Report.pdf 

HarbourVest. (2026). Unlocking the power of private markets. https://www.harbourvest.com/us/en?preventForwarding=true 

Lazard. (2026). Lazard Interim 2026 Secondary Market Report. https://lazard.com/research-insights/lazard-interim-2026-secondary-market-report/ 

S&P Global. (2026). Private equity secondaries fundraising boosted by surge in deals. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/2/private-equity-secondaries-fundraising-boosted-by-surge-in-deals-97715254