Secondaries Markets Hit $200B as Liquidity Crunch Reshapes Private Equity

What's New

The secondary markets have officially outgrown their "cottage industry" origins, with annual transaction volume surpassing $200B in 2025, up from just $9B during the 2008 financial crisis and roughly $1B a quarter century ago. In a wide ranging conversation on the Alt Goes Mainstream podcast, Lexington Partners' Taylor Robinson explained why four consecutive years of distribution slowdowns have transformed secondaries from a niche liquidity mechanism into essential portfolio infrastructure for both institutional and wealth channel investors.

Why It Matters

The private markets distribution rate has collapsed from roughly 25% of starting NAV annually to just 8%–12%, creating unprecedented structural demand for secondary liquidity across pensions, endowments, and foundations. This isn't cyclical. It signals a permanent shift in how capital navigates private markets, turning secondaries from a tactical exit valve into a core allocation that Robinson argues deserves standalone asset class treatment.

Memorable Quotes

• On repricing power: "We have the ability to take a fund that might be second or third quartile and at the right price turn it into a first quartile type return for our LPs." Robinson highlights the unique value proposition of secondaries: the ability to reset the return clock on existing private equity portfolios by entering at the right moment in a fund's lifecycle.

• On the liquidity reversal: "In 2021, if you asked the CIO what's the challenge, they would have said staying at 15%. The money's coming back too fast." This captures the whiplash institutions experienced as private equity went from generating excess distributions to producing a two thirds drop in cash flows in just a few years.

• On the alignment imperative: "We are in the alignment business because we don't control any of the assets." Robinson frames the central tension of secondary investing: building massively diversified portfolios while remaining dependent on hundreds of general partners who control the underlying companies.

• On what makes people great: "Being someone who others want to work with gets you invited into the room for that conversation." In a market defined by asymmetric information and relationship driven deal flow, Robinson argues that EQ and reliability outweigh raw quantitative skill as career differentiators.

• On the discount myth: "This market is sophisticated enough where the sellers know what they're selling and it works for them, and we know what we're buying and it works for us. It is not opportunistic or episodic anymore." Robinson pushes back on the persistent misconception that secondaries are a distressed, discount driven strategy, arguing the market has matured well beyond that framing.

Big Picture Drivers

• Distribution drought: Four years of suppressed exits have cut LP cash flows by roughly two thirds, forcing active portfolio rebalancing through secondary sales rather than organic fund lifecycle liquidity.

• Inventory explosion: A decade of near zero interest rates fueled tens of trillions in private market NAV that has now outgrown its traditional liquidity channels.

• Positive asset selection: Sellers have shifted from dumping unwanted GP relationships to curating menus of 100+ fund positions, selling partial stakes to recycle into the same managers.

• GP led evolution: Continuation vehicles now represent roughly one third of secondary volume, with GPs creating structured liquidity events around their highest conviction assets.

• Wealth channel adoption: Retail and RIA capital is entering through both drawdown and evergreen structures, with 20% of Lexington's $22B flagship fund sourced from wealth investors.

By The Numbers

• $200B+: Estimated 2025 global secondary transaction volume, up from $9B in 2008.

• 2–4%: Share of total deal flow Lexington ultimately executes, reflecting extreme selectivity from a market that surfaces roughly 2x the volume that actually trades.

• 40%: Proportion of Lexington's deals completed with repeat sellers, underscoring relationship depth as a competitive moat.

• 8–12%: Current annual distribution rate as a percentage of starting NAV, down from ~25% pre 2022.

• $30–50B: Robinson's view on the feasible scale ceiling for a single secondary fund, noting deal flow could support deployment well beyond current sizes.

Key Trends to Watch

• Standalone allocation status: As the market reaches scale, CIOs are beginning to treat secondaries as a distinct asset class rather than a subset of private equity, which would unlock materially larger commitment budgets.

• Return dispersion widening: Firm specialization across single asset CVs, tail end portfolios, and leveraged strategies is likely to spread the historically tight band of secondary fund returns, making manager selection more consequential.

• Evergreen structural tension: Open ended secondary vehicles are attractive for wealth capital, but negotiating billion dollar LP deals requires certainty of capital that evergreen structures cannot fully guarantee without a large drawdown fund alongside.

• Regulatory convergence: As private markets extend into 401(k)s and broader retail channels, standardized valuations and reporting requirements will compress informational advantages over time, echoing the maturation pattern of every prior asset class.

The Wrap

The secondaries market has crossed a threshold where it functions as a structural necessity for the $10T+ private markets ecosystem, not an optional liquidity tool. For allocators and product leaders, the implication is clear: secondary capabilities, whether via dedicated funds, evergreen wrappers, or embedded platform features, are becoming table stakes infrastructure. Firms that can pair scale, relationship density, and disciplined asset selection will capture disproportionate share as this market potentially doubles again.

Watch Full Episode: Lexington Partners' Taylor Robinson on Alt Goes Mainstream