The secondary market: A fertile hunting ground for the value-focused investor

The private equity secondary market has transformed from an obscure corner of alternative investments into a thriving ecosystem with record-breaking transaction volumes. What was once a niche market primarily serving distressed sellers has evolved dramatically. In 2024, the global secondary market saw an all-time-high in transaction volume of approximately $160 billion, representing remarkable growth from $114 billion in 2023 and $103 billion in 2022. Over the past decade, secondaries have grown at an impressive compound annual rate of 18%, outpacing even the robust 15% growth rate of the primary private equity market¹.

This robust growth can be attributed to the favourable market environment over the last few years, but more importantly to long-term structural changes within private markets.

The current macroeconomic environment has created particularly favourable conditions for secondary market growth. Elevated interest rates have significantly impacted traditional exit pathways, with both IPO activity and M&A transactions experiencing notable slowdowns. Consequently, private equity managers have extended holding periods for portfolio companies, creating a mismatch between fund lifecycles and investor liquidity expectations.

This prolonged holding period phenomenon has had cascading effects throughout the private equity ecosystem. As fund managers retain investments beyond initially anticipated timelines, limited partners (LPs) face delayed distributions, potentially hampering their ability to make new commitments. Some institutional investors have also found themselves overallocated to private equity relative to public market investments due to the denominator effect—where declining public market valuations automatically increase the percentage allocation to private assets. These factors collectively create compelling motivations for LPs to consider secondary sales.

The historically favourable demand-supply dynamic has fostered a buyers’ market, enabling buyers to choose from broad pools of assets and negotiate LP interests at attractive prices. This environment has facilitated the rise of attractive discounts as illustrated in the graph below.

LP-LED SECONDARIES PRICING (% NAV)

Although the deals that successfully closed were notably appealing, the sharp decline in pricing led to a significant bid-ask spread, complicating transactions. Many sellers opted to delay their activities in anticipation of more favourable conditions. However, the year 2023 witnessed a resurgence in prices, resulting in an uptick in deal flow. This normalization of pricing trends persisted into 2024, cultivating a robust and conducive environment for dealmaking.

In 2025, following the latest spate of market turbulence triggered by Trump’s fluctuating tariff announcements, many existing private equity investors are facing portfolio rebalancing considerations, some of which would be driven by the denominator effect resulting from tumbling public markets. This could represent a strong buying opportunity for secondaries investors, further reinforcing the positive dynamic of a buyers’ market, potentially allowing for negotiating power over discounts.

Investors are witnessing the beginning of a secondary buying opportunity in private markets and should be able to take part in this long-term trend, starting today. Carmignac Private Evergreen has a significant allocation to secondaries, targeting around a material allocation to secondary co-investments. This underscores the fund's prudent utilization of secondary market opportunities to enhance portfolio diversification and potential returns.

The fund further benefits from a strategic alliance with Clipway, a leading, highly innovative LP-interest focused secondaries firm. This partnership emerged from Carmignac's significant initial investment from its own balance sheet to seed Clipway's inaugural fund, cementing a foundation of trust and collaborative prowess. Thanks to this partnership, Carmignac Private Evergreen continuously receives co-investment opportunities alongside Clipway’s main fund – with no fee, no carry – allowing our experts to consider an extensive pipeline.

This partnership, combined with Carmignac’s in-house private equity team comprising of four dedicated experts, is also supported by sector, ESG and macroeconomic analysts and specialists, This enables us to offer an all-in-one solution that seeks quality deals and taps on the attractive pricing benefits of secondary markets: Carmignac has been disciplined with its approach to pricing, securing on average 15% discount at closing², notably outperforming the average buyout discount rate of 6% in 2024.

The secondary market's expansion shows no signs of slowing, with some projections suggesting annual transaction volumes could reach $200 billion in 2025³. This trend underpins a future where secondary transactions become increasingly integral to institutional investment strategies, providing greater flexibility and improved capital efficiency. As the market matures, we can expect further innovations in transaction structures, pricing mechanisms, and accessibility. Funds such as Carmignac Private Evergreen are already capitalising on these trends and attractive market dynamics.