Secondaire, comment la liquidité rebat les cartes du private equity

Secondary Markets and Liquidity in Private Equity

The secondary market in private equity has evolved from a backup tool to a central management mechanism, integrated into the strategies of General Partners (GPs) and the cash constraints of Limited Partners (LPs).

12% average turnover rate. This is observed by Lexington Partners in a historically illiquid market. The sale of fund shares or assets is no longer marginal; it is now part of a structural management logic. LPs no longer simply "buy and hold." They arbitrate, lighten, and optimize. Liquidity becomes a management variable, not just a contingency.

This shift is partly due to an unprecedented imbalance between capital calls and distributions. According to Bain & Company, returns on Net Asset Value (NAV) have dropped to 9-12% , compared to 22-24% a decade ago. Consequently, distributions no longer cover calls, and the "net cash flow" becomes negative.

For many LPs, including pension funds, insurers, and sovereign funds, this means a deadlock. They must either draw from other budget lines, delay new commitments, or sell. This imbalance mechanically fuels the growth of the secondary market. Selling shares becomes both a financial adjustment variable and a risk management strategy.

On the GPs side, strategy is also evolving. The average number of holdings in portfolios has doubled over the past decade. Traditional exits like IPOs and M&As are slowing down. To stay exposed to their best assets while meeting the liquidity needs of LPs, managers are creating continuation vehicles , selling in strips, and using NAV lending . These tools, once reserved for complex situations, are becoming standard practice.

The boundary between primary and secondary markets is blurring. Many secondary deals today involve healthy assets, premium holdings, sometimes even reinforced by existing GPs. The secondary market is no longer a repository for missed opportunities; it becomes a strategic extension of funds, serving as an exit tool, liquidity provider, and re-underwriting mechanism.

This paradigm shift has cascading effects. Less liquidity upstream results in more selectivity at the entry level.

In early-stage phases , the scarcity of distributions affects Seed and Series A investments. GPs slow down their investment pace, prioritize faster-profitability models, and tighten their criteria. Capital becomes slower, more costly, and more demanding. In scale phases , funding rounds become more composite. New entrants (secondary funds, co-investors, SPVs) take stakes in structured deals. Some startups see their capital change hands without official fundraising. Others engage in partial liquidity processes for key founders or employees. For mature startups , exits are postponed. However, this opens the door to new forms of financing. Single-asset continuation vehicles allow the refinancing of a gem while ensuring strategic alignment with former investors. These arrangements provide cash and visibility, at the cost of potentially more complex governance.

D’après FrenchWeb.