What Are Secondaries?
Secondaries (or “secondary transactions”) are the purchases and sales of existing interests in Private Equity funds or portfolios, rather than investments in new funds (known as primary investments).
There are two main types of secondaries: LP-led and GP-led.
LP-led Secondaries
In LP-led secondaries, a Limited Partner (LP), such as a pension fund or family office, sells its interest in one or more PE funds to another party. This can be done to restructure portfolio risk, generate liquidity (a nice way of saying the transaction frees up cash), or adjust investment strategy. The buyer takes over the existing rights and obligations of the selling LP, including future capital commitments and the claim on fund distributions.
GP-led Secondaries
GP-led secondaries are initiated by the General Partner (GP), the fund manager of a private equity fund. In these transactions, (part of) the portfolio from an older fund is transferred into a new vehicle. Investors in the old fund can choose to sell their stake or roll it over into the new fund. These deals are often used to hold on to valuable assets for longer or to raise additional capital for further growth.
Secondaries at Marktlink Capital
At Marktlink Capital, we also work with secondaries in several ways. Firstly, we include secondary funds in our funds-of-funds as part of our diversification strategy. We also offer direct feeder funds into secondary funds.
Why Secondaries?
Secondaries offer flexibility in a market where investments are typically locked in for the long term. Both LP- and GP-led transactions are playing an increasingly important role in the professionalization and expansion of the private equity sector.
The main advantage of secondaries for investors is that sellers often offer their positions at a discount to the fund’s net asset value, allowing buyers to enter at an attractive price—essentially creating an instant uplift in value.
Another benefit is that buying into secondaries is not a blind commitment. You're acquiring a stake in an existing portfolio or a company that has already been under private equity ownership for some time. This also shortens the investment horizon significantly, as you're entering a deal that’s already in progress—something many investors find appealing.
