At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of deploying capital into secondary fund interests, contact us today to start the conversation.
Historically, limited partners (LPs) in private equity and alternative asset funds have been sellers of fund interests when pursuing liquidity or portfolio rebalancing. Recently, however, a meaningful shift has emerged: many LPs are taking on the role of buyers in the secondary market and actively purchasing stakes in existing funds. This transition reflects broader market dynamics, evolving investor strategies, and structural changes in private markets.
According to data from leading advisory firms, “over half of LPs seek to buy and sell LP-led positions on the secondaries market.” Secondaries Investor Further, the maturation of the secondaries market—with narrowing bid-ask spreads and increased capital available for acquisition—has enhanced the appeal of acquiring fund interests as opposed to only disposing of them. CAIS+1
In sum, LPs are no longer just passive recipients of fund distributions or occasional sellers of interests. They are stepping into a more active role—buying stakes with the objective of generating liquidity, shortening investment horizon, accessing mature assets, and diversifying exposure more efficiently.
One of the most compelling motivations for LPs to buy existing fund interests is the ability to access assets further along in their lifecycle. By purchasing a fund interest in-flight, LPs reduce blind-pool risk and shorten the hold period to realization. According to one report, the average age of funds sold in LP-led transactions dropped to 6.6 years in 2024—versus greater vintage age in prior years. CAIS This reflects buyer appetite for portfolios that are closer to cash-flowing or realizing value, which aligns with LPs seeking less horizon risk.
Traditional primary fund commitments leave LPs exposed to long lock-up periods, vintage risk, and uncertain exit timing. By entering the secondary market as buyers, LPs can:
Secondary‐market pricing has improved materially, particularly for high-quality assets. For example, buyout fund LP-led transactions in 2024 reportedly traded around 94 % of NAV—demonstrating how buyers are willing to pay near-par for select portfolios. CAIS+1 This increased liquidity and tighter discounting make acquisition strategies more viable for LPs, particularly when combined with access to robust diligence processes and favorable structuring.
For LPs with constrained primary allocations or capital calls, acquiring secondary interests offers a means to deploy capital into private markets without committing to a new blind-pool. In some cases, LPs also view secondary acquisitions as more tax efficient—acquiring stakes from sellers who have already navigated the early value creation period. This effectively allows LPs to step into a financing round later in the value-curve.
As the secondary market expands, many LPs view secondary investing as a competitive edge. By participating as buyers, they can:
With LPs entering the buyer pool, competition for high-quality portfolios has increased. Reports note that “evergreen 40 Act funds and other non-traditional buyers are bidding aggressively on tail-end portfolios,” sometimes at pricing near 90 % + of NAV. ION Analytics For LPs considering buying stakes, this means careful underwriting, access to deal flow, and transaction structuring remain critical.
Buying fund interests requires more operational and analytical infrastructure than simply committing to a new fund. LPs need:
When LPs position themselves as buyers rather than only sellers, it changes their relationship with GPs. Being a buyer can open doors to:
As buyers in secondary markets hold interests across varying durations and maturities, LPs must treat these acquisitions with the same rigor as primary fund commitments. That means setting clear exit planning, tracking underlying portfolio progression, and understanding distributions timing. Without active monitoring, secondary acquisitions can drift into illiquid hold scenarios despite the shorter runway.
LPs are evolving from passive capital providers and occasional sellers into active liquidity buyers in the secondary market. By acquiring fund interests, LPs gain access to mature assets, diversify their portfolios, shorten hold periods, and manage illiquidity more strategically. This shift is underpinned by favourable secondary market mechanics, improved pricing, and the increasing recognition of secondaries as a core portfolio tool rather than a niche activity.
For LPs considering this path, a rigorous partner—such as F2H Capital—can provide the structuring, diligence, execution and strategic insight required to navigate this evolving space effectively.
At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of deploying capital into secondary fund interests, contact us today to start the conversation.
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