How Secondaries Are Reducing the Friction of Commitment for Private Market Investors

Private equity has long been one of the most rewarding yet challenging asset classes. It offers access to companies in their most dynamic phases of growth, often long before public investors get a chance. But for all its potential, private equity also comes with a major drawback: illiquidity.

For High Net Worth Individuals (HNIs) and Ultra HNIs, this has often been the sticking point. Unlike equities or bonds, private equity investments can lock up capital for 7–10 years, making it difficult to reallocate or book profits when new opportunities arise. According to insights from leading private wealth managers in India, this rigidity has historically deterred many affluent investors from allocating larger portions of their portfolios to private equity.

The rise of private equity secondary markets is changing this. By giving investors the ability to exit or enter private positions mid-cycle, secondaries are reducing the friction of commitment and making private markets more accessible.

The Liquidity Challenge in Private Equity

Traditional private equity investing is like boarding a long-haul flight with no option to disembark. Once capital is committed, investors must wait for an eventual exit through an IPO, acquisition, or buyback.

For HNIs, this rigidity creates three distinct challenges. The first is opportunity cost: capital locked up in a fund cannot be redeployed when better opportunities emerge. The second is portfolio imbalance, as overexposure to a single company, sector, or fund can distort overall allocation. The third is psychological friction: even if returns are strong, the inability to take money off the table creates discomfort.

In a fast-moving market like India, where new opportunities are constantly arising in technology, healthcare, and infrastructure, this lack of flexibility has been a deterrent for many investors.

What Secondaries Bring to the Table

The secondary market in private equity allows investors to buy and sell existing commitments or company stakes before the natural exit event.

For sellers, secondaries offer early liquidity without waiting for the fund’s full life cycle. They provide the ability to rebalance portfolios, release cash for other opportunities, or de-risk exposure by partially exiting a concentrated bet.

For buyers, secondaries enable entry into assets at later stages, often closer to exit, and sometimes at negotiated valuations compared to primary commitments. Importantly, they reduce blind pool risk, since the underlying company or fund is already partially visible.

In other words, secondaries create a win-win dynamic: sellers unlock capital, and buyers gain access to seasoned assets that are often “in the money” from day one.

Why Secondaries Resonate With HNIs

HNIs in India are increasingly drawn to secondaries because they combine the upside of private markets with flexibility more akin to public investments. Shorter holding periods, often three to five years instead of seven to ten, are a major attraction. Exposure is typically de-risked, as companies are more mature by the time they come to market through secondary deals. And in many cases, secondary transactions are priced at discounts, allowing investors to capture upside more efficiently.

For affluent investors accustomed to managing liquidity actively, this combination makes private equity participation more palatable.

The Rise of AIF Platforms for Secondaries

One of the most important developments in India has been the integration of secondary opportunities into Alternative Investment Funds (AIFs). Instead of HNIs sourcing deals individually, AIF platforms now curate baskets of high-quality secondary opportunities.

Accessing secondaries through AIFs offers three advantages. Professional diligence ensures deals are vetted by experienced managers. Diversification allows investors to spread risk across multiple secondaries transactions rather than concentrating in one or two positions. And access itself is broadened, as many secondary deals flow through closed networks that would otherwise be difficult for individual investors to reach.

This model mirrors what global investors have been doing for decades, and its arrival in India marks a turning point for private wealth management.

The Strategic Role of Secondaries in a Portfolio

For HNIs, secondaries are not a replacement for primary private equity commitments but a strategic complement. They help with liquidity management, allowing capital to recycle without waiting a full cycle. They smooth returns, since secondaries are often closer to exits and can deliver more predictable IRRs. And they support cycle balancing, providing entry points into assets that are already partially de-risked, especially during volatile market phases.

Globally, secondaries deal volume reached $162 billion in 2024, reflecting a maturing asset class. And India is beginning to follow this trajectory as its private equity ecosystem deepens.

Challenges and Considerations

While secondaries are attractive, they are not without nuances. Pricing can vary widely depending on asset quality and timelines to exit. Access remains a challenge, as the best deals often flow to institutional or well-connected investors. And even in later stages, risks around execution, regulation, or governance remain.

This is why structured access through AIFs or professional platforms is particularly valuable for HNIs, as it ensures transparency and discipline in deal selection.

Secondaries as the Bridge Between Illiquidity and Flexibility

At its core, the appeal of secondaries is simple: they bring flexibility to an otherwise rigid asset class. For Indian HNIs, who are increasingly global in outlook but local in opportunity, this balance is crucial.

By reducing the friction of long-term commitments, secondaries allow them to remain invested in private markets without feeling locked in, actively manage portfolios across cycles, and align allocations with changing risk appetites and market conditions.

Through AIF structures, secondaries offer the trifecta of liquidity, diversification, and professional management. In doing so, they lower barriers for affluent investors who want to participate in private markets without sacrificing agility.

Research Analyst

Simran Mehla

Frequently Asked Questions

Q: What problem do secondaries solve for private equity investors?

A: Secondaries address the illiquidity of private equity by allowing investors to buy or sell commitments before natural exits such as IPOs or acquisitions, reducing the friction of long lock-in periods.

Q: Why are secondaries gaining traction among HNIs in India?

A: They offer shorter holding periods, de-risked exposure since assets are more mature, and often more attractive pricing. This makes private equity participation more flexible and appealing for affluent investors.

Q: How do AIF platforms make secondaries more accessible?

A: AIF platforms curate secondary opportunities, provide professional diligence, diversify exposure across deals, and open access to networks that individual investors might not reach on their own.

Q: How large is the global secondaries market?

A: Globally, secondaries deal volume reached $162 billion in 2024, underscoring the strategy’s maturity. India is beginning to follow this trajectory as its private equity ecosystem develops.

Sources

1. Insights adapted from a leading wealth management platform in India
2. Jefferies H1 2025 Global Secondary Market Review
   https://www.jefferies.com/wp-content/uploads/sites/4/2025/08/Jefferies-Global-Secondary-Market-Review-July-2025.pdf?utm_term=6601147548