Secondary private equity: investing in mature funds

Secondary private equity has established itself as one of the most dynamic segments of private equity. Rather than directly financing companies through a new fund, investors buy stakes in already established funds on a rapidly expanding secondary market that reached $160 billion in transactions in 2024, and is projected to reach approximately $240 billion in 2025 according to Jefferies. This asset class is attractive due to its reduced J-curve, purchase discount, and the visibility it offers into already identified underlying assets.

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What is secondary private equity?

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Secondary private equity refers to the buying and selling of stakes in existing private equity funds. Unlike a primary investment, where the investor commits to a fund that has not yet deployed its capital, secondary allows for the acquisition of stakes in an already invested fund, where part of the portfolio is known and valued.

Primary and secondary markets

In the primary market, an investor, known as a limited partner (LP), subscribes to a management company (general partner or GP) which will then identify target companies and deploy capital over several years. The investor does not know, at the time of their commitment, which companies will make up the final portfolio: this is known as blind pool risk.

In the secondary market, the investor buys stakes in a fund once it has already been established and partially deployed. They know some of the underlying assets, have a performance history, and typically enter between the fourth and seventh year of the fund's life. This positioning on more mature assets shortens the horizon before the first distributions.

The underlying assets of a secondary fund

A secondary private equity fund holds a portfolio of stakes in other funds, which are themselves invested in dozens, sometimes hundreds, of unlisted companies. This layered structure gives secondary funds immediate diversification far superior to that of a single primary fund. Depending on the strategy, the portfolio can span multiple vintages, sectors, and geographic regions, diluting the specific risk of each holding.

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How do secondary private equity transactions work?

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The secondary market relies on two main types of transactions, which have balanced out in recent years.

LP-led transactions (Limited Partners)

These are the traditional and still majority transactions in the market, accounting for approximately 52% of volumes in 2025, according to Jefferies. A limited partner wishes to sell their stakes in one or more funds before their term, most often to gain liquidity, rebalance their portfolio, or meet regulatory requirements. A secondary fund acquires these interests, usually at a discount to net asset value, and assumes the seller's rights and obligations in the existing fund.

GP-led (General Partner) Transactions

These rapidly growing operations are initiated by the general partner themselves. The general partner reorganizes one or more assets from a maturing fund into a new vehicle, known as a continuation fund, to extend the holding period for promising assets. Existing LPs can either exit or reinvest in the new vehicle. This mechanism provides liquidity to exiting investors while allowing the general partner more time to create additional value.

Here's how a secondary transaction unfolds in three steps:

Benefits of secondary private equity

Secondary investments offer several benefits, making them a core portfolio building block for many investors.

A reduced J-curve and faster returns

In a primary fund, the initial years are characterized by fees and capital calls without distributions, leading to a negative J-curve. The secondary market focuses on already mature assets, whose value is close to or already in the realization phase. Consequently, investors receive distributions sooner and shorten the time to capital return.

An acquisition discount and improved asset visibility

Acquiring stakes at a discount to net asset value offers a potentially advantageous entry point. Crucially, the investor already has insight into part of the underlying portfolio, unlike in primary investments where they commit blindly. This visibility reduces uncertainty and simplifies risk-return analysis.

Increased diversification

A single secondary fund provides access to multiple underlying funds, and thus to a large number of companies, spread across several vintages, sectors, and geographical areas. This immediate diversification limits the impact of an isolated underperformance and smooths returns over time.

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A rapidly growing secondary market

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The secondary private equity market is experiencing sustained growth. After a record $160 billion in transactions in 2024, it reached approximately $240 billion in 2025, a 48% year-on-year increase, according to Jefferies' annual report. This dynamic is driven by a structural need for liquidity among institutional investors, in a context of slowing exits and IPOs, and by the increasing prominence of continuation funds initiated by managers.

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Dry powder dedicated to secondaries also reached a record high, around $327 billion by the end of 2025, demonstrating investor appetite for this strategy. This abundance of available capital supports market liquidity and transaction regularity, while maintaining some pressure on prices.

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What are the risks and best practices?

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Like any unlisted asset class, secondary private equity carries risks that must be understood before investing.

Risk of capital loss: performance depends on the quality of underlying assets and market conditions at exit. A discount at acquisition does not guarantee a gain.

Illiquidity Risk: Even if it shortens the horizon, secondary remains a long-term investment, with capital locked up for several years.

Valuation Risk: The net asset value used is based on fair value estimates, which may differ from the actual sale price of the assets.

Manager Selection Risk: The quality of analysis, access to deal flow, and the ability to negotiate discounts make a difference to the final performance.

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Primary vs. Secondary Private Equity: What are the Differences?

Primary and secondary investments are not opposing; they complement each other within a private equity allocation. The table below summarizes their structural differences.

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As a benchmark, the net IRR for private equity over ten years stands at 12.4% according to France Invest and EY (data as of December 31, 2024). Secondary investments generally aim for more moderate multiples than the best-performing primary investments, but with lower dispersion of results and a more favorable liquidity profile.

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Investing in Secondary Private Equity with Fundora

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Fundora opens access to secondary private equity for individual investors through a demanding institutional architecture. Where institutional secondary funds require tickets of several hundred thousand euros, Fundora lowers this barrier through pooling. This offering complements the platform's other unlisted components: private equity, venture capital, growth equity, and private debt funds.

Democratized Access via FPCI and SPV Structures

Each secondary strategy distributed by Fundora is structured as an FPCI (Fonds Professionnel de Capital Investissement - Professional Private Equity Fund). A SPV (Special Purpose Vehicle) mechanism pools subscriptions from multiple investors within a single structure, which then subscribes to the original institutional ticket. This arrangement makes an asset class previously reserved for institutional investors accessible, while maintaining the selection standards of the professional market.

Mandate Management Provided by Kyoseil Asset Management

Effective management is entrusted to Kyoseil Asset Management, a portfolio management company authorized by the AMF under number GP-99040. Fundora identifies and proposes the strategies, with management handled by Kyoseil Asset Management under the mandate. This regulatory framework is a guarantee of seriousness in a sector where the quality of the management company is crucial.

Secondary Strategies Offered by Fundora

Fundora has already provided access to a diversity of secondary strategies, illustrating the depth of this asset class: pre-IPO secondary strategies like Soho Secondary, as well as Momentum Secondary, Altaris Secondary, Second-X, Ultimate Secondary USA, Pre-IPO Secondary USA, and Allstars Secondary strategies. These strategies cover different risk and maturity profiles, with multiple objectives generally ranging between 2x and 2.5x. The selection process is rigorous and prioritizes recognized market funds.

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For more committed profiles, Fundora Plus offers enhanced support. Registration is done directly on the Fundora platform.