For decades, investing in private markets required investors to accept a fundamental tradeoff: in exchange for the potential for attractive long-term returns, investors surrendered liquidity and patience was rewarded.
A typical private equity commitment could take years before producing meaningful distributions. Capital was called gradually, portfolio companies were valued periodically, and investors waited for exits - often through an acquisition or IPO - to realize their gains. The result was the familiar private-markets “J-curve”: negative cash flows in the early years followed by distributions later in the life of the investment.
That model is changing.
The emergence of a large and increasingly sophisticated secondary market is giving investors new ways to access private assets while potentially shortening the time between investment and cash realization. Secondaries are evolving from a niche liquidity mechanism into an important component of private-market portfolio construction.
The implications extend well beyond liquidity.
The J-curve is more than a theoretical concept. It represents the real cost of private-market investing: capital can be tied up for years before investors see meaningful distributions.
That dynamic has become particularly important in today’s market. According to McKinsey, five-year rolling distributions to paid-in capital for buyout funds reached their lowest recorded level in 2025. Distributions represented approximately 6% of buyout AUM during the six months ending June 2025, compared with a 10-year average of approximately 14%. Longer holding periods and slower exits have contributed to the pressure on distributions.
The challenge is circular. When exits slow, capital remains trapped inside existing funds. Limited Partners (LPs) receive less cash back, which can make it harder to fund new commitments. Managers, meanwhile, look to find alternative ways to create liquidity for investors.
That is where the secondary market comes in.
The scale of the secondary market has changed dramatically.
Jefferies estimates that global secondary transaction volume reached approximately $240 billion in 2025, a 48% increase from the prior year and the largest annual volume on record. Importantly, the growth was not confined to one type of transaction: LP-led transactions represented approximately $125 billion, while GP-led transactions reached approximately $115 billion.
The momentum has continued into 2026. Lazard estimates that approximately $124 billion of secondary transactions were completed in the first half of 2026 alone, up approximately 28% year over year. On a trailing-12-month basis through June, volume reached approximately $260 billion; roughly double the market’s 2021 level.
This is important because secondaries solve two different problems.
In an LP-led secondary, an existing investor sells its interest in a private fund to another investor. The seller receives liquidity while the buyer acquires a portfolio of already-seasoned investments, often with greater visibility into the underlying assets and their remaining life.
In a GP-led transaction, a manager creates a continuation vehicle that allows investors to receive liquidity while giving the manager additional time to own and develop a high-conviction asset.
In both cases, the traditional 10-year private-equity timeline becomes more flexible.
The most interesting development is that secondaries are increasingly being used proactively rather than simply to solve a liquidity problem.
Consider two hypothetical private-equity portfolios.
The second portfolio does not eliminate private-market risk. But it can change the shape of the cash flows.
That is the key insight: the J-curve isn’t necessarily something investors simply have to endure. It is increasingly something they can manage.
There is another important development. As secondary-market volume expands, private assets are receiving more frequent opportunities for price discovery.
That doesn’t mean private assets suddenly trade like public stocks. Transactions remain negotiated, information can be limited, and prices can vary significantly based on asset quality, fund age, structure and liquidity.
But a growing secondary market creates an observable reference point for assets that otherwise might only be valued quarterly.
The growth of secondaries does not mean investors should simply replace primary private-market commitments with secondary investments.
There are tradeoffs. A secondary buyer may pay a premium for exceptional assets, while continuation vehicles can introduce conflicts that require careful underwriting. Transaction structure, fees, leverage, investor alignment, valuation methodology and the quality of the underlying companies can materially affect outcomes.
What’s clear is that private markets are gaining some features investors associate with public markets, though far from public-market liquidity: more price discovery, more active portfolio management and more flexibility around when and how investors enter or exit an asset.
The result is a more deliberate approach to private-market allocation.
Rather than viewing private equity as a single 10-year commitment with an unavoidable J-curve, investors can increasingly think in terms of portfolio construction across vintages, liquidity profiles and stages of asset maturity.
That creates the possibility of building a private-market portfolio where some capital is committed to new opportunities, some is invested in mature assets, and some is reserved for secondary opportunities as dislocations emerge.
The J-curve isn't disappearing but managing it now takes more than patience. It takes access across the full life cycle of private assets and the judgment to know when each one fits.
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