Why Secondaries Are Thriving While IPOs Stall

For years, private equity investors counted on two major exit routes: the IPO market and corporate M&A. But as global markets slowed, these pathways narrowed, leaving limited partners (LPs) waiting longer for distributions and general partners (GPs) struggling to deliver liquidity.

In this environment, the secondaries market has become a lifeline. Once a niche tool, secondaries now sit at the center of portfolio management strategies. With IPOs and M&A frozen, investors are turning to secondaries to unlock liquidity, extend ownership of prized assets, and redeploy capital more efficiently.

The Exit Drought

Global private equity markets are now four to five years into a subdued environment for IPOs and M&A. High interest rates, geopolitical shocks, and market volatility have all contributed to reduced exit opportunities. IPO markets have slowed as valuation mismatches and investor risk aversion make new listings rare. M&A activity has also decelerated, as rising financing costs reduce the attractiveness of strategic sales. The combined effect has been a liquidity squeeze, with LPs facing the “denominator effect.” With allocations to private markets locked up for longer, it has reduced their ability to recycle capital into new commitments.

This combination has created a liquidity squeeze. And secondaries, once a fallback option, have become the primary outlet. In practice, this means that investors who once waited years for liquidity are now able to sell positions mid-cycle, while managers can restructure vehicles to keep their strongest assets for longer. The shift underscores how secondaries have moved from being a reactive solution to a proactive tool, one that provides flexibility and continuity in an environment where traditional exits are no longer keeping pace.

The Rise of Secondaries as a Solutions Provider

Secondaries are thriving because they serve multiple liquidity needs at once. For LPs, selling stakes provides immediate liquidity without waiting for distributions. Mega-portfolio sales, sometimes in excess of $1–5 billion, are now becoming increasingly common. For GPs, continuation funds offer flexibility, enabling managers to hold onto high-performing assets longer while still giving investors the option of liquidity. For buyers, secondaries provide access to diversified private equity portfolios with reduced blind-pool risk and a more balanced risk-return profile.

This ability to simultaneously meet the needs of LPs and GPs has turned secondaries from a niche solution into a structural feature of private markets.

Fundraising and Deal Volume: Records Amidst Stagnation

While exits via IPO and M&A have slowed, secondaries are breaking records. In 2024, annual deal volume hit $162 billion, the highest ever recorded. By the first half of 2025, deal volume had already reached $103 billion, putting the market on track for another record year. Fundraising tells a similar story: $80.8 billion was raised in H1 2025, 90% higher than the previous record set in H1 2023 and already nearing 2024’s full-year totals.

This highlights a structural shift. As traditional exits falter, capital and attention are flowing to the secondaries market instead.

Why Secondaries Offer a Better Risk-Reward Trade-Off

The secondaries market is not just a substitute for IPOs, it offers distinct advantages. Buyers acquire assets partway through their lifecycle, meaning performance data is already available and blind-pool risk is reduced. Moreover, secondaries often deliver private equity-style returns but with a more defensive, credit-like risk profile. For many investors, this makes secondaries one of the most efficient ways to access private markets.

Challenges: Allocations and Dry Powder

The liquidity boom in secondaries is not without constraints. Slower exits have left LPs overallocated to private equity, reducing their ability to commit new capital, even to strategies they value. At the same time, deal flow surged in 2025, while dry powder fell from $216 billion at the end of 2024 to $171 billion by mid-2025. Encouragingly, Evercore estimates that GPs are now targeting $218 billion in fresh capital over the next year, a sign that the dry powder gap may begin to close. Even so, demand for secondaries solutions continues to outpace the capital available for these dedicated strategies, ensuring the market remains highly competitive.

Execution capacity is also a concern. With record deal volumes, firms are stretched thin on human capital, struggling to staff enough experienced teams to manage parallel transactions. These bottlenecks show that while secondaries are thriving, the infrastructure around them is racing to catch up.

Geopolitical Volatility: A Stress Test Passed

2025 brought an unexpected stress test for secondaries. When U.S. tariffs introduced by President Trump in April rattled global markets, many feared secondaries deal activity would pause. Yet after only a brief slowdown, activity rebounded within weeks.

This resilience demonstrates how secondaries have matured from an opportunistic niche into an essential, stable part of private markets infrastructure. Unlike IPOs and M&A, which depend on favorable conditions, secondaries can adapt quickly and provide liquidity even during volatility.

Looking Ahead: Integration Into Core Allocations

The success of secondaries during an IPO drought has permanently altered how investors view the strategy. Mega-funds like Ardian’s $30 billion flagship provide scale and reliability. New entrants such as Accel-KKR, with sector-specific vehicles, show how the strategy can evolve into specialized niches. Retail capital is also making inroads, with semi-liquid structures widening access for high-net-worth investors.

These developments suggest that secondaries are becoming embedded as a core allocation across institutional and private wealth portfolios.

From Backstop to First Resort

Secondaries have evolved from being a fallback option to the first resort for liquidity in private markets. While IPOs and M&A remain important, their slowdown has revealed just how critical secondaries have become for the functioning of the ecosystem.

With fundraising at record levels, deal volumes on track to break $200 billion, and risk-reward profiles that rival traditional private equity, secondaries have earned their place as a core allocation. For LPs seeking liquidity, GPs looking for flexibility, and buyers searching for attractive entry points, secondaries are now indispensable.

Chief Brand & Investor Relations Officer

Sneha Dadrwal

Frequently Asked Questions

Q: Why have IPOs and M&A slowed down?

A: High interest rates, valuation mismatches, and geopolitical uncertainty have reduced both public listings and M&A activity, creating fewer exit opportunities for private equity.

Q: How do secondaries provide liquidity when IPOs stall?

A: Secondaries allow LPs to sell fund stakes and GPs to launch continuation funds, ensuring that capital continues to circulate even when traditional exits are unavailable.

Q: What makes secondaries attractive compared to other exit routes?

A: They reduce blind-pool risk by acquiring assets mid-life and often provide private equity-level returns with a more defensive risk profile.

Q: What challenges does the secondaries market face?

A: A temporary shortage of dry powder and execution bottlenecks are current challenges. However, new fundraising cycles and broader participation are expected to alleviate these pressures.

Q: Are secondaries resilient in times of market volatility?

A: The rebound after the tariff shock in 2025 showed that secondaries can adapt quickly and provide liquidity even in unstable conditions.

Q: How will secondaries evolve in the future?

A: The market will continue to grow through mega-funds, new entrants, sector-specific strategies, and retail access products, embedding secondaries as a permanent feature of private markets.

Sources

1. The Secondaries Investor 50: 2025.
   https://www.secondariesinvestor.com/top-secondaries-firms/
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