Private Equity Secondary Markets

This entry reviews the existing academic literature, and discusses recent trends, surrounding private equity secondary markets. Private equity secondary markets involve sales of ownership interests in a private fund from the fund’s current investors (i.e., limited partners) to new investors. Typically, limited partners transact directly with a fund, investing in the fund upon formation. After investing, limited partners’ ownership interests in the fund are illiquid, with capital generally tied up until the fund liquidates. However, in some cases, limited partners can exit their investment in a private fund through the secondary market. This entry first describes the private equity fund secondary market, covering both LP- and GP-led secondaries. To date, the academic literature has focused on LP-led secondaries. However, in recent years the number of GP-led secondaries has grown substantially, making up nearly half of all private equity secondary market transactions in 2022. The entry then summarizes two streams of research, the first covering research providing perspectives on the functioning of private equity secondary markets and the second covering empirical studies that analyze actual secondary market transactions