Secondaries

Private fund interests — in private equity, venture, or private credit vehicles — are illiquid by design, with typical lives of ten years or more. A secondary transaction allows an existing investor (the seller) to exit before that term ends by selling their stake to a new buyer (the secondary purchaser). The buyer acquires a seasoned interest rather than starting from scratch.

For wealthy families, secondaries offer a distinctive profile. Because the underlying portfolio companies are already partially known, there is less "blind pool" risk than committing to a brand-new fund. The J-curve — the early period of negative returns common in private funds before realizations occur — is also reduced or eliminated, since the portfolio is already mature. Families considering private markets exposure sometimes use secondaries as an entry point.

Pricing is a critical variable. Secondaries trade at a discount or premium to net asset value, depending on market conditions, the desirability of the underlying assets, and the seller's urgency. A common confusion is assuming a steep discount always signals a bargain; it may instead reflect genuinely impaired assets. Sellers, meanwhile, sometimes underestimate the tax consequences of a mid-life fund exit. A qualified tax attorney should evaluate any specific transaction.