The Rise of Secondaries: Unlocking Liquidity in Private Markets

A lot of investors are now taking a second look at secondaries. Once a niche corner of the financial world, private equity secondary funds, which buy existing stakes from other PE funds, have experienced substantial growth over the past few years. So what does the growth tell us about private markets as a whole, and what role can secondaries play in portfolios today? I'm Allison Nathan, and this is Goldman Sachs Exchanges. Today, I'm joined by my colleagues Harold Hope and Alex Blostein. Alex covers US asset managers and other financial companies for Goldman Sachs Research. And Harold sits in

Thank you.

Thanks for having us.

So, Harold, let's start at a very basic level here. What is secondaries investing, and tell us a little bit about the history of the space.

We really love the private equity model, but one of the big drawbacks is that it's very illiquid, and private equity investments can often last ten, fifteen years or longer. What we're doing in the secondaries is really providing liquidity to folks who have invested in these long dated illiquid assets before their natural termination. So if you're in a private equity investment that's going to last fifteen years and you want to get out in year five or six or seven or eight, we'll come in and buy your interest out early and we'll ultimately hold maturity. So the market started really as a handf

So, Alex, give us some numbers here. How fast is the secondary space growing and what's driven that growth? Harold touched on that, but maybe you Yeah, could give us a bit more

of course. We'll touch on the sizing and the growth maybe first and then we'll look at a couple of drivers. So to Harold's points, the growth has been phenomenal. The market today sits at about six fifty billion dollars in assets under management. It is predominantly an institutional marketplace. It's probably close to 90% still institutional, but we are starting to see retail participate in that market as well. And we'll probably get into that in a little bit later in the conversation. The space has compounded at about a 15% growth rate over the last ten years. And while most of the asset cla

And as we've seen this growth continue, are we seeing the fund structures actually change?

So one of the biggest changes that we're seeing is likely the rise of retail. That's probably been one of the more powerful trends that it's not really occurring only in secondaries, that's pretty consistent across other private markets asset classes. And that's one of the biggest growth themes that we've been following. But if you look at the retail space, it's about $40,000,000,000 in NAV today, but it's growing almost at a 50% organic growth. There's a handful of managers that are fairly sizable that have launched retail strategies targeting this type of products. So the secondaries product