---
title: "Secondaries | Altss Glossary"
description: "Secondaries are transactions in which existing interests in private funds, or assets held by those funds, are sold or restructured before the underlying…"
canonical: "https://altss.com/glossary/secondaries"
---

Glossary · Asset class

# Secondaries

Also called: secondary market · secondary transactions

In venture usage "secondary" often means a sale of existing company shares; that is a direct secondary, covered separately. This entry covers the market for interests in private funds and for fund-held assets.

Secondaries are transactions in which existing interests in private funds, or assets held by those funds, are sold or restructured before the underlying investments are realised; the market divides into LP-led and GP-led transactions.

Publisher: Altss LLCPublished 2025-12-29Content modified 2026-10-02

ALTSS-SEC-001

A private fund ties up an investor's money for a decade or more and offers no redemption. The secondary market is where an investor that wants out sells its stake to another investor, at a price quoted as a percentage of the fund's last reported value. A fund manager can also organise the sale, for example by moving assets the fund still owns into a new vehicle and letting existing investors choose between cash and staying invested.

## What changes hands

Most secondary transactions involve interests in closed-end private funds. An LP interest is a bundle: the investor's share of the fund's [net asset value](https://altss.com/glossary/net-asset-value) (its capital account), its remaining [unfunded commitment](https://altss.com/glossary/unfunded-commitment), and its rights and obligations under the limited partnership agreement. A buyer that takes over an interest receives future distributions and must meet future capital calls. The fund's portfolio does not change; one investor replaces another.

The second category moves assets rather than interests. In a GP-led transaction the manager sells one or more portfolio companies from an existing fund to a new vehicle it also manages, or brings in a buyer to purchase interests from the fund's LPs. Existing LPs choose whether to take cash or keep their exposure.

Buyout fund interests are the most familiar, but interests in venture, growth, private credit, real estate and infrastructure funds also trade, each with its own pricing issues.

## LP-led and GP-led transactions

- **LP-led**: an investor sells interests it holds: one fund, a portfolio of many funds, or a pro rata strip across several. The GP usually has to consent to the transfer but does not run the sale. See [LP-led secondary](https://altss.com/glossary/lp-led-secondary).

- **GP-led**: the manager initiates a transaction that restructures the fund's assets or investor base: a [continuation vehicle](https://altss.com/glossary/continuation-vehicle) holding one or several assets, a tender offer to all LPs, a GP-led strip sale, a whole-fund restructuring, or a preferred equity investment in the fund. See [GP-led secondary](https://altss.com/glossary/gp-led-secondary).

- **Structured terms** can appear in either: deferred payment, buyer-side financing, seller-retained interests, or a commitment by the buyer to the GP's next fund (a staple).

The split matters because the conflicts differ. In an LP-led sale, buyer and seller negotiate at arm's length and the GP is a third party with consent rights. In a GP-led deal the manager acts for the selling fund and manages the buying vehicle, so price setting, disclosure and LP choice need explicit protection. The glossary of Form PF, the report that registered private fund advisers above a size threshold file with the Securities and Exchange Commission (SEC), defines an adviser-led secondary transaction as one initiated by the adviser or a related person that offers fund investors the choice to sell all or part of their interests or to convert or exchange them for interests in another vehicle advised by the adviser or a related person.

## Why LPs and GPs sell

LPs sell to raise cash; to bring private-markets exposure back to target after public markets fall (the [denominator effect](https://altss.com/glossary/denominator-effect)); to reduce the number of manager relationships they monitor; to exit late-life positions with little remaining value; or because their strategy, regulation or ownership has changed. A sale is often a portfolio-management decision rather than a sign of distress, although forced sellers do appear in stressed markets.

GPs initiate transactions when a fund is near the end of its term but the manager wants more time or more capital for particular assets, when LPs want liquidity that exits are not providing, or to restructure an older fund.

## Why buyers buy, and what they take on

Buyers include dedicated secondary funds, funds of funds, pension plans, insurers, sovereign funds, endowments and family offices investing directly, and semi-liquid vehicles that use secondaries to put capital to work quickly. Compared with a primary commitment, a secondary purchase gives exposure to identified assets rather than a blind pool, a shorter remaining holding period and earlier distributions. That shortens and flattens the [J-curve](https://altss.com/glossary/j-curve) but does not remove it: fees, future capital calls and asset outcomes still drive returns.

The risks are specific. Sellers usually know more about their interests than buyers (adverse selection). Pricing rests on a NAV that may be several months old. GP-led deals concentrate exposure in a few assets. The buyer inherits the unfunded commitment and the fund's remaining fees and carried interest. Where the buyer then measures the interest at the GP-reported NAV, for example under the US accounting practical expedient for investments in funds that report a net asset value, a purchase below NAV appears as an unrealised gain at the next measurement date; that is an accounting effect, not a realised return.

## How secondaries are priced

Fund interests are quoted as a percentage of NAV at a stated reference date. Calls the seller funds and distributions it receives after that date are settled at closing, the buyer assumes the unfunded commitment on top of the price, and part of the price may be deferred, which lowers its present value. A price below 100% of NAV is a discount; above 100% it is a premium. Formulas and worked examples are in [secondary pricing](https://altss.com/glossary/secondary-pricing).

## Direct secondaries are a separate market

In venture usage, a "secondary" often means a sale of existing shares in a private company by founders, employees, angels or early funds. That is a direct secondary: the asset is company stock, the transfer is governed by the company's charter documents and shareholder agreements (rights of first refusal, co-sale rights, board approval), and the price is set against the company's financing rounds rather than a fund NAV. The two markets share some issues, such as information asymmetry and the signal a sale sends, but the mechanics, documents and buyers differ, and data about one should not be read as data about the other.

## Jurisdiction and status

- **Institutional Limited Partners Association (ILPA)**: *Continuation Funds: Considerations for Limited Partners and General Partners* (May 2023) is current guidance and is under revision, with draft replacement guidance released in June 2026. It addresses the absence of a true status-quo option, unrealistic decision timelines, incomplete disclosure, and engagement of the [LPAC](https://altss.com/glossary/lpac) on conflicts. ILPA Principles 3.0 (2019) recommend that the GP engage the LPAC early, offer rolling LPs a status-quo option on unchanged economic terms, and pay for the adviser that solicits bids rather than charging it to the fund.

- **US**: as of 2 October 2026 no SEC rule requires a fairness or valuation opinion for an adviser-led secondary. Rule 211(h)(2)-2 of the SEC's 2023 Private Fund Adviser Rules would have done so; the Fifth Circuit set the rules aside in June 2024 and the SEC removed the text from the CFR effective 19 November 2024. Private equity fund advisers that file [Form PF](https://altss.com/glossary/form-pf) must still report each adviser-led secondary transaction within 60 days of the end of the fiscal quarter, an obligation that took effect on 11 December 2023; a joint proposal by the SEC and the Commodity Futures Trading Commission of April 2026 would eliminate that reporting and had not been adopted as of 2 October 2026.

- **Valuation**: the NAV used as the pricing anchor is prepared under the fund's valuation policy, commonly following the International Private Equity and Venture Capital Valuation (IPEV) Guidelines, whose 2025 edition is in effect for quarterly reporting periods beginning on or after 1 April 2026 and defines fair value consistently with US Accounting Standards Codification (ASC) Topic 820 and International Financial Reporting Standard (IFRS) 13.

- **Tax**: transfers of partnership interests can carry withholding and other tax consequences. In the US, Internal Revenue Code (IRC) section 1446(f) can require a buyer to withhold on the amount realised by a foreign seller, and a partnership whose interests become readily tradable on a secondary market can be taxed as a corporation under IRC section 7704 as a publicly traded partnership, one reason fund agreements restrict transfers. How these rules apply to a specific transaction depends on its facts.

## Market data

Volume and pricing statistics for the secondary market are published mainly by secondary advisers and intermediaries from their own deal surveys. Definitions differ, for example whether GP-led volume counts rolled interests or only new money, so figures from different publishers are not directly comparable. This entry does not reproduce them.

## Not the same as

- [Secondary Buyout (SBO)](https://altss.com/glossary/secondary-buyout): A secondary buyout is the sale of a whole portfolio company from one sponsor to another in an M&A process; it is a private equity exit route, not a trade in fund interests.

- Direct Secondary: A direct secondary transfers shares in an operating company under company-level transfer restrictions; fund secondaries transfer fund interests or fund-held assets under the fund's limited partnership agreement (LPA).

- Secondary Fund: A secondary fund is a vehicle that buys secondaries; "secondaries" is the market and the strategy.

- [NAV Lending (NAV Facility)](https://altss.com/glossary/nav-facility): A NAV facility is a loan secured on a fund's portfolio; the fund keeps the assets and repays the debt. A secondary is a sale or restructuring of ownership.

## How it is classified

- A transaction is a secondary when the asset is an existing fund interest or a fund-held asset that changes ownership or is restructured, not a new commitment to a fund (a primary) and not new capital raised by a company.

- LP-led when the holder of a fund interest initiates the sale and the fund itself is unchanged; GP-led when the manager initiates a transaction that restructures the fund's assets or investor base.

- A sale of company shares by founders, employees or early investors is a direct secondary, not a fund-interest secondary.

- A sale of a whole portfolio company to an unaffiliated sponsor is a secondary buyout, an exit; a sale of the same company into a vehicle managed by the same GP is a GP-led secondary.

## Common mistakes

- Assuming secondaries always trade at a discount. Price relative to NAV depends on asset quality, fund age, deal type and market conditions, and some interests trade at or above NAV.

- Treating the purchase price as the buyer's full cost. The buyer also assumes the unfunded commitment.

- Comparing quoted prices without checking the NAV reference date and whether part of the price is deferred.

- Calling a sale of company shares by founders or employees a fund secondary. It is a direct secondary with different documents and mechanics.

- Reading the day-one gain from buying below NAV as realised performance.

- Saying secondaries eliminate the J-curve. They shorten and flatten it; fees, future calls and asset outcomes still drive returns.

## Edge cases

- An interest in a young fund with most of its commitment still unfunded behaves more like a primary commitment: the price is small relative to the buyer's total exposure.

- An interest with near-zero NAV but remaining obligations can trade at a nominal or negative price, with the seller paying the buyer to assume it.

- In a GP-led deal an LP that rolls makes no sale but its economic terms change.

- Interests in evergreen funds can usually be redeemed, subject to gates, so secondary sales of them are less common and are priced against redemption terms.

## Questions

### Do secondaries always trade at a discount to NAV?

No. Price relative to NAV varies with asset quality, fund maturity, deal type and market conditions. Some interests trade at or above NAV, and a quoted percentage means little without its reference date and payment terms.

### Are secondaries an asset class or a strategy?

Both usages exist. Allocators often treat secondaries as a segment of their private-markets allocation; managers describe buying secondaries as a strategy. The underlying exposure is to the same private equity, credit, real estate or infrastructure assets.

### What is the difference between LP-led and GP-led secondaries?

In an LP-led deal an investor sells its own fund interest and the fund is unchanged. In a GP-led deal the manager initiates a restructuring, typically moving assets into a continuation vehicle, and existing LPs decide between cash and a stake in the new vehicle.

## External standards

| Standard | Relation | Note |
| --- | --- | --- |

| ILPA Continuation Funds: Considerations for LPs and GPs (May 2023) (GP-led continuation fund processes) | narrower | Covers the GP-led segment only; under revision (draft CV guidance 24 June 2026). |

| Form PF section 6 (SEC) (Event reporting of adviser-led secondary transactions) | narrower | In force as of 2026-10-02; an April 2026 SEC/CFTC proposal (91 FR 22232) would eliminate section 6. |

## Sources

- [Continuation Funds: Considerations for Limited Partners and General Partners](https://ilpa.org/resources-tools/resource-library/continuation-funds-considerations-for-limited-partners-and-general-partners/). Institutional Limited Partners Association, ILPA, May 2023. Status: Current but under revision: draft Continuation Vehicle guidance released 24 June 2026, comments closed 5 August 2026; final not yet confirmed (checked 2026-10-01). Guidance (May 2023); resource-page note on the 2026-06-24 draft — supports: ILPA continuation-fund themes and current revision status

- [ILPA Principles 3.0: Fostering Transparency, Governance and Alignment of Interests for General and Limited Partners](https://ilpa.org/wp-content/uploads/2019/06/ILPA-Principles-3.0_2019.pdf). Institutional Limited Partners Association, ILPA, Third edition, released 27 June 2019. Status: Current edition (no 4.0 found as of 2026-10-01) (checked 2026-10-01). p. 24 (GP-led Secondary Transactions) — supports: GPs should engage the LPAC early; status-quo option with no change in economic terms for rolling LPs; adviser engaged at the cost of the GP, not the fund

- [Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews (final rule), Release No. IA-6383](https://www.sec.gov/files/rules/final/2023/ia-6383.pdf). U.S. Securities and Exchange Commission, Adopted 2023-08-23. Status: vacated (checked 2026-10-01). Rule 211(h)(2)-2 (vacated); text checked on eCFR point-in-time 2024-01-01 — supports: What the vacated adviser-led secondaries rule would have required

- [National Association of Private Fund Managers v. SEC, No. 23-60471 (5th Cir. June 5, 2024)](https://www.govinfo.gov/app/details/USCOURTS-ca5-23-60471). U.S. Court of Appeals for the Fifth Circuit (via govinfo, USCOURTS collection), Decided 2024-06-05. Status: final (checked 2026-10-01). Decision of 2024-06-05 — supports: Vacatur of the Private Fund Adviser Rules

- [Announcement Regarding the Private Fund Advisers Rules](https://www.sec.gov/announcement-regarding-private-fund-advisers-rules). U.S. Securities and Exchange Commission, 2024-10-31. Status: current (checked 2026-10-01). List of vacated rules incl. 211(h)(2)-2 — supports: Scope of the vacatur

- [Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews (final rule; technical amendments), 89 FR 91252](https://www.govinfo.gov/content/pkg/FR-2024-11-19/pdf/2024-26524.pdf). U.S. Securities and Exchange Commission (Federal Register via govinfo), Published and effective 2024-11-19. Status: in force (checked 2026-10-01). 89 FR 91252, DATES (effective 2024-11-19) and amendatory instructions removing 275.211(h)(2)-2 — supports: Removal of the vacated text from the CFR

- [Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; Requirements for Large Private Equity Fund Adviser Reporting (final rule), Release IA-6297, 88 FR 38146](https://www.govinfo.gov/content/pkg/FR-2023-06-12/pdf/2023-09775.pdf). U.S. Securities and Exchange Commission (Federal Register via govinfo), Adopted 2023-05-03; published 2023-06-12; sections 5 and 6 effective 2023-12-11; remainder effective 2024-06-11. Status: in force (checked 2026-10-01). 88 FR 38146 (DATES: section 6 effective and compliance date 2023-12-11); 88 FR 38161-38162 (section 6 item B: adviser-led secondary transactions reported within 60 days of fiscal quarter end; definition); 88 FR 38188 (respondents: registered advisers with at least $150 million in private fund assets) — supports: Quarterly event reporting of adviser-led secondaries by all private equity fund advisers that file Form PF; definition of adviser-led secondary transaction; effective 2023-12-11

- [Form PF (reference copy): General Instructions and Glossary](https://www.sec.gov/files/formpf.pdf). U.S. Securities and Exchange Commission, Reference copy posted at sec.gov/files/formpf.pdf, OMB No. 3235-0679; includes Sections 5 and 6 added by the 2023 amendments. Status: current (checked 2026-10-01). Glossary of terms, "adviser-led secondary transaction"; General Instruction 1 — supports: Definition of an adviser-led secondary transaction; Form PF filed by registered advisers with at least $150 million in private fund assets

- [International Private Equity and Venture Capital Valuation Guidelines (2025 edition)](https://www.privateequityvaluation.com/Portals/0/Documents/Guidelines/2025%20IPEV%20Valuation%20Guidelines.pdf). IPEV Board, IPEV, Published 11 December 2025; in effect for quarterly reporting periods beginning on or after 1 April 2026; early adoption encouraged. Status: Current; supersedes the December 2022 edition (checked 2026-10-01). Introduction, p. 5 (in effect for quarterly reporting periods beginning on or after 1 April 2026); Section I 1.1, p. 9 (Fair Value definition) — supports: Valuation basis for NAV; fair value defined as the price received to sell an asset in an orderly transaction between market participants at the measurement date (the IFRS 13 / ASC 820 wording); edition and effective date

- [26 U.S.C. 1446 - Withholding of tax on foreign partners' share of effectively connected income (incl. 1446(f))](https://www.law.cornell.edu/uscode/text/26/1446). U.S. Congress (Internal Revenue Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 1446(f)(1) — supports: US withholding on transfers of partnership interests by foreign sellers

- [26 U.S.C. 7704 - Certain publicly traded partnerships treated as corporations](https://www.law.cornell.edu/uscode/text/26/7704). U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 7704(a)-(c)(2) — supports: A partnership whose interests are readily tradable on a secondary market is a publicly traded partnership treated as a corporation, subject to the qualifying-income exception

- [Form PF; Reporting Requirements for All Filers (joint proposed rules), 91 FR 22232](https://www.govinfo.gov/content/pkg/FR-2026-04-24/pdf/2026-07993.pdf). U.S. Securities and Exchange Commission and Commodity Futures Trading Commission (Federal Register via govinfo), Proposed 2026-04-20; published 2026-04-24; comments due 2026-06-23. Status: proposed (checked 2026-10-01). 91 FR 22232 (summary, Release IA-6959, proposed 2026-04-20); 91 FR 22257 (section II.O: proposal to eliminate Form PF section 6 in its entirety); pending as of 2026-10-02 — supports: Pending SEC/CFTC proposal of April 2026 to eliminate Form PF section 6 private equity event reporting; not adopted as of 2026-10-02

- [ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)](https://storage.fasb.org/ASU%202015-07_2.pdf). Financial Accounting Standards Board, May 2015. Status: in force (codified in ASC 820) (checked 2026-10-01). ASC 820-10-35-54B as amended; 'Who Is Affected' (NAV per share practical expedient in ASC 820-10-35-59) — supports: US GAAP practical expedient to measure certain fund investments at NAV per share (or its equivalent)

## Related terms

8 terms

- [Continuation Vehicle (CV)](https://altss.com/glossary/continuation-vehicle)

- [Secondary Pricing](https://altss.com/glossary/secondary-pricing)

- [Tender Offer (Secondaries)](https://altss.com/glossary/tender-offer)

- [Unfunded Commitment](https://altss.com/glossary/unfunded-commitment)

- [Private Capital (Private Markets)](https://altss.com/glossary/private-capital)

- [LP-Led Secondary](https://altss.com/glossary/lp-led-secondary)

- [GP-Led Secondary](https://altss.com/glossary/gp-led-secondary)

- [Stapled Secondary](https://altss.com/glossary/stapled-secondary)

## Referenced by

6 terms

- [3(c)(7) Fund](https://altss.com/glossary/3-c-7-fund)

- [Closed-End Fund](https://altss.com/glossary/closed-end-fund)

- [Denominator Effect](https://altss.com/glossary/denominator-effect)

- [J-Curve](https://altss.com/glossary/j-curve)

- [Secondary Buyout (SBO)](https://altss.com/glossary/secondary-buyout)

- [Fund Term (Fund Life)](https://altss.com/glossary/term-fund-life)

## Concept record

Concept ID

ALTSS-SEC-001

Classification

Asset class · Strategy

Topics

Secondaries

Version

2.0.0

Last reviewed

2026-10-02

Structured data

[JSON](https://altss.com/reference/concepts/secondaries.json)

Source check

Regulatory, tax and accounting statements checked against the cited primary sources on 2026-10-02 ([how](https://altss.com/methodology)). General information, not advice.

## Canonical URL

https://altss.com/glossary/secondaries