Secondaries Rising

Inside the booming market for private equity interests

A reminder that my podcast, Net Interest Extra, is back. Next week’s episode is an interview with Oxford professor of finance Ludovic Phalippou about the ways to measure returns in private equity.

In a world that’s speeding up, private equity stands out as an anachronism. Over the past half-century, holding periods of stocks have collapsed from over five years to under one, CEO tenures have halved, the average lifespan of an S&P 500 company has fallen from six decades to under twenty years – yet private equity still asks investors to lock up capital for twelve.

Just take a look inside the Washington State Investment Board’s portfolio. The fund, which manages money for Washington’s public employees from its offices in Olympia, has been investing in private equity since the early 1980s. It now has over a quarter of its capital allocated to the asset class, double the national average for state pension funds. But while its early investments have fully paid out – it made 5.5 times its money on KKR’s 1986 fund – it still has exposure to investments that stretch back 20 years. Currently, around 14% of the value tied up in its mega buyout portfolio stems from commitments it made more than ten years ago. Although the outstanding commitment is small, KKR’s 2006 fund still sits on its balance sheet two decades after it seemed like a good idea.

Even within its more recent investments, it has become harder to get cash out. In a trend we’ve discussed here before, private equity funds are holding on to underlying positions for longer, delaying liquidity events for end investors. According to Bain & Company, the median holding period for a buyout-backed exit is currently over six years, versus historic lows of less than four. For allocators like Washington State Investment Board this means slower payouts. In the 12 months to June 2025, distributions declined to 12% of the market value of investments, down from 31% in 2021.

At a time when everything else is getting faster, the duration embedded in private equity looks increasingly out of step. So it’s no surprise that Wall Street has been engineering a solution. A secondary market for private equity holdings has been around for a while but last year its growth really took off. In total, a record $240 billion of volume changed hands in 2025, up nearly 50% on the prior year.

Supply came from a range of sources but to meet it, demand had to be created. The largest private equity close of the year was a fund dedicated to secondaries which raised $30 billion of capital. It’s an area established firms are targeting. On his October earnings call, Blackstone founder Steve Schwarzman listed the secondaries market among his top priorities for capital deployment – alongside digital and energy infrastructure, private credit and Asia. And last week, Stockholm-based EQT acquired specialist firm Coller Capital with $50 billion of assets under management. Coller reckons that transaction volume will grow to $500 billion across the market by 2030.

“We cannot just dispose of some of these assets overnight,” the chair of the Washington State Investment Board told the Seattle Times this week. Well now she can.

For the full story of how a single transaction sparked today’s $240 billion market – and where it goes next, read on.