Secondaries are reshaping private markets liquidity | Nigel Dawn, Evercore | Ep #85
Evercore is the global number one in secondaries advisory, controlling more than half the market. So it’s fair to say that Nigel Dawn sees almost everything. And what he sees above all, is opportunity.
Secondaries are becoming central to how private markets function -from pricing and liquidity to portfolio construction and capital recycling.
At roughly 2% of global private markets NAV, secondaries remain small relative to the overall asset base. Yet their importance is growing rapidly, not as a niche or distressed corner of the market, but as a core mechanism through which investors actively manage exposure and test valuation assumptions.
What role do secondaries play in private markets?
Secondaries can be understood as more than just a sub-asset class. They are increasingly the mechanism through which private markets operate in practice.
This is where portfolios are priced, where liquidity is created and where the theoretical valuation of an asset meets the reality of what a buyer is willing to pay. In that sense, secondaries are the closest thing private markets have to continuous price discovery.
While public markets operate with constant trading and visible pricing, private markets rely on periodic NAV updates. The secondaries market bridges that gap. It is where valuation, liquidity and investor behaviour intersect.
How large is the secondaries market today?
Despite the attention it receives, the secondaries market remains relatively small. Annual transaction volumes of around $225 billion represent only a fraction of total private markets NAV.
That imbalance highlights how early the market still is relative to the scale of private assets globally.
As allocations to private markets continue to increase, the expectation is that secondaries will grow in parallel. This is driven by structural factors rather than cyclical ones, including:
- Larger and more complex LP portfolios
- Greater need for liquidity and rebalancing
- Increased participation from private wealth capital
- More sophisticated GP-led solutions
The implication is that secondaries are not just growing, they are becoming structurally embedded.
What does a sophisticated secondaries strategy look like?
The most advanced LPs treat private markets as a dynamic portfolio rather than a static allocation.
This manifests in several ways. Investors are more likely to be repeat sellers, regularly using secondaries to reposition portfolios rather than relying solely on natural distributions. They are also increasingly focused on relative value, assessing whether capital is better deployed in newer vintages or different strategies.
The result is a more active approach to private markets investing, where secondaries play a central role in capital allocation, not just liquidity provision.
Are continuation vehicles misunderstood?
Continuation vehicles have become one of the defining features of the modern secondaries market. They are also one of the most misunderstood.
The common narrative suggests they are used to delay exits or avoid crystallising losses. Nigel’s perspective is more nuanced.
In many cases, continuation vehicles are created around high-quality assets with further upside. The GP may believe that selling today would transfer future value to another buyer, often a competitor. Instead, a continuation structure allows the GP to retain ownership while offering liquidity to existing investors.
In practical terms, continuation vehicles:
- Provide optional liquidity to LPs
- Allow GPs to extend ownership of strong assets
- Introduce new capital to fund further growth
Rather than being a sign of weakness, they often reflect conviction in the underlying asset.
How are conflicts managed in GP-led transactions?
Continuation vehicles are inherently conflicted. The GP is effectively both seller and buyer.
However, the market has developed clear processes to manage this. Industry guidelines, including those from the Institutional Limited Partners Association, emphasise transparency and fairness.
Key safeguards include:
- Running competitive auction processes
- Providing equal access to information for all participants
- Securing LP advisory committee approval
- Ensuring investors have the option to hold or sell
Crucially, LPs are not forced sellers. The ability to roll into the new structure provides a meaningful protection against misaligned incentives.
How is price actually determined in secondaries?
One of the most important concepts in private markets is the distinction between value and price.
NAV represents the manager’s assessment of value, typically based on quarterly reporting and audited annually. Secondary pricing reflects something different. It incorporates the return expectations of the buyer, the quality of the asset and prevailing market conditions.
In practice, pricing is determined through a combination of:
- GP-reported valuations
- Direct diligence on underlying assets
- Cross-referencing with comparable investments
- Negotiation between informed participants
This creates a rigorous, multi-layered process. It is less transparent than public markets, but not less sophisticated.
Is there growing scepticism around private markets valuations?
There is increasing scrutiny, particularly when public market valuations move sharply.
However, private markets behave differently. Valuations tend to adjust more gradually and incorporate a broader set of inputs than public comparables alone. They are less influenced by short-term sentiment and more anchored in long-term cash flows.
The secondaries market plays an important role here. It acts as a validation mechanism, testing whether NAVs are supported by executable prices.
What impact is private wealth capital having?
Private wealth capital is becoming an increasingly important part of the secondaries ecosystem. Nigel estimates that 10–15% of capital now comes from retail-style vehicles.
This capital is typically deployed through established managers and often alongside institutional funds. As a result, it has not materially disrupted pricing discipline.
One observable trend is a preference for high-quality assets with visible growth potential, reflecting the performance requirements of these vehicles.
What is the outlook for secondaries?
The direction of travel is clear. Secondaries are moving from a niche segment to a core component of private markets.
Several areas are likely to drive growth:
- Continued expansion of GP-led transactions
- Increased use of secondaries for portfolio management
- Greater participation from private wealth
- Rapid development of private credit secondaries
Private credit, in particular, is expected to follow the trajectory of private equity secondaries, potentially becoming a major market in its own right.
Why this matters
Secondaries are not just about liquidity. They are about how private markets function at scale.
They provide the mechanism through which assets are priced, portfolios are adjusted and capital is recycled. As private markets continue to grow, secondaries will play an increasingly central role in shaping outcomes for both GPs and LPs.
For anyone looking to understand the reality of private markets, rather than the theory, secondaries are the place to look.