What are secondaries?

In an LP-led secondary, an investor sells its own fund stakes; in a GP-led secondary, the manager runs the sale, often moving assets into a continuation vehicle. Prices are usually quoted as a percentage of the latest reported NAV, and the buyer takes on any unfunded commitment. Sellers may want cash sooner or to rebalance their portfolio, and the manager usually has to consent to a transfer.

Say a pension has a stake in a buyout fund reported at $100 million, with $20 million still to be called. A buyer pays $90 million for it and also takes over the promise to pay the $20 million. Simple example. Terms vary by fund.

They give investors a way out of a fund before it ends, usually at a price set against the fund’s reported value, and they let buyers see what a fund owns before they pay.

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