Private markets research · checked 20 October 2026
Private equity secondaries: how the transactions work
By Dan Keegan · Page updated
Private equity secondaries involve buying existing private-market interests rather than making a new commitment to a fund at its launch.
The FCA’s review of private-market valuations explains why valuation processes and conflicts matter when assets do not trade frequently.
Start with the transaction: an LP selling a fund interest and a GP moving assets into a continuation vehicle create different decisions for the investor.
- LP-led and GP-led explained
- Seven diligence checks
- No performance ranking
Who is involved
Who is buying and selling an existing interest?
An LP-led sale transfers an investor’s existing fund interest to a buyer, including the associated rights and obligations.
Hamilton Lane’s introduction to secondaries explains the transaction and why an investor might seek liquidity before a fund ends.
The economic exposure is to underlying companies, even when the legal asset being transferred is an interest in their fund.
- Selling LPSeeks liquidity or a different portfolio mix; selling does not by itself establish distress.
- BuyerUnderwrites the portfolio, purchase price and remaining funding obligations.
- Fund managerManages the underlying fund; transfer requirements depend on its documents.
- Fund interestCarries rights to distributions and may include unfunded commitments.
Compare the structures
How do LP-led and GP-led transactions differ?
Private equity secondaries can be organised around an LP portfolio sale or around a manager-led restructuring.
Lexington’s secondaries strategy describes both partnership portfolios and continuation vehicles.
| Question | LP-led fund-interest sale | GP-led continuation transaction |
|---|---|---|
| What is transferred? | An existing LP fund interest or portfolio of interests. | One or more assets move into a new vehicle or related transaction structure. |
| Who starts the process? | An investor seeking a change in exposure or liquidity. | The manager seeking a liquidity or ownership-duration arrangement. |
| What does an existing LP decide? | Whether to sell the interest on the proposed terms. | Whether to sell, continue exposure or consider another option offered by the documents. |
| Where can risk concentrate? | Underlying company, sector, vintage and manager concentrations. | A single asset, a small group of assets and continuing sponsor dependence. |
| What needs checking? | Transfer consent, remaining commitments and price adjustments. | Price discovery, conflicts, fees, sponsor economics and sell/roll terms. |
Reference NAV
Does a discount to NAV prove the price is attractive?
No: a discount compares a price with a particular reported valuation, not with a guaranteed amount the buyer will receive.
Private equity secondaries pricing needs a dated reference NAV, information on later cash flows and a clear allocation of calls and distributions between pricing and settlement.
The FCA valuation review discusses independent challenge and conflicts when valuations affect different investors.
- NAV dateIdentify the valuation date and the reporting currency.
- Portfolio changeAsk what has changed since the reference date.
- Cash flowsRead how calls and distributions adjust the consideration.
- PriceSeparate headline discount, fees, financing and settlement terms.
Seven checks
Which seven checks belong in a secondaries review?
Use this list to organise the evidence; it is not a substitute for transaction-specific diligence.
ILPA’s published 2023 continuation-fund guidance gives LP-focused recommendations on process and disclosure.
- 01
Identify the legal asset
A partnership interest, direct company holding and continuation-vehicle interest do not create identical rights.
- 02
Reconcile valuation and price
Record the NAV date, reporting currency, purchase price and any cash-flow true-up.
- 03
Map the underlying companies
Look through the fund label to company, sector, geography, vintage and leverage exposures.
- 04
Read remaining obligations
Review unfunded commitments, follow-on funding, guarantees and the relevant documents.
- 05
Inspect sponsor alignment
Understand conflicts, price discovery and any changes to fees or carried-interest economics.
- 06
Test the process
Review access to information, adviser roles, decision time and transfer or consent requirements.
- 07
Assess the actual vehicle
Check eligibility, liquidity restrictions and expenses; a secondary purchase does not make a private fund freely tradable.
A continuation decision
Why does a continuation fund need a separate conflicts review?
A GP-led transaction can place the same sponsor on different sides of an asset transfer.
Private equity secondaries investors should understand how the selling fund, continuing investors, incoming buyers and sponsor are treated.
ILPA’s recommendations describe LPAC engagement and third-party price validation; they are industry guidance, not a universal legal timetable.
The ILPA overview describes its revised 2026 guidance as draft at our review date; this guide cites the published 2023 document.
- Selling investorsNeed the price and sale terms explained.
- Rolling investorsNeed the new vehicle’s economics and obligations.
- New capitalNeeds enough information to underwrite the assets.
- SponsorShould explain alignment and any economic reset.
Use your figures
What is the arithmetic discount to a stated NAV?
This private equity secondaries calculator compares your purchase price with your stated reference NAV.
It does not estimate fair value, forecast an exit or calculate a return.
Your figures · arithmetic only
Discount (%) = (reference NAV − purchase price) ÷ reference NAV × 100. A price above NAV is shown as a premium.
Use figures in the same currency and for the same interest. The calculation excludes fees, leverage, unfunded commitments and cash-flow adjustments.
Choose the next evidence
What should be clear before a buyer or seller proceeds?
Private equity secondaries decisions should be grounded in the actual asset, documents, pricing basis and transaction process.
Our eight-manager comparison helps distinguish stated strategies; the fund-structure guide explains the parties and capital flows.
A manager investing secondary capital is different from an adviser arranging the transaction; compare the relevant placement and private-capital advisers separately.
- ExposureThe asset and look-through risks are understood.
- DocumentsRights and remaining obligations have been reviewed.
- EconomicsPrice, costs and funding assumptions are explicit.
- ProcessConsent, conflicts and decision steps are documented.
A discount to NAV is a price comparison, not a promised return.
Compare eight secondaries manager strategies →questions
Which questions remain?
No. Existing portfolio information can help underwriting, but leverage, concentration, valuation uncertainty and liquidity restrictions remain relevant.
A shorter expected holding period or NAV discount does not guarantee a particular return.
The associated funding obligations must be checked in the fund and transfer documents.
Do not evaluate only the cash purchase price; remaining commitments can change the buyer’s overall funding requirement.
Yes.
The private equity secondaries firms directory compares eight stated strategies using official manager sources.
It is an unranked research selection, not an assessment of performance or investor eligibility.
sources
Which sources support this guide?
Primary sources for the rules and figures on this page.