The traditional secondaries model was designed for a market that has shifted. Blind pool capital committed to a 10-year fund, with returns generated at terminal exit of the underlying portfolio. This worked when there were 5,000 portfolio companies and 1,000 exits a year. Today, there are 29,000 PE-backed companies with a similar number of exits. It suggests that secondaries are the future market infrastructure. Instead of being a reactive tool when LPs need to buy in to or cash out of mid-life funds, they are a more proactive layer that supports capital allocation, portfolio management and rebalancing during the fund’s lifecycle. In 5 years, do secondaries look more like a market infrastructure? And what does it mean for the illiquidity premium?
