Secondaries are the mechanism of choice for delivering liquidity in today’s private markets. Global secondary volume reached a new high of $103B in H1 2025, far outpacing global IPO proceeds of $61.4B, and Goldman Sachs, Morgan Stanley, and Charles Schwab have all recently bolted on secondaries firms via acquisition. But in our view, secondary markets are not becoming more transparent or efficient. Here’s how we see it:
What to Know
- Volume ≠ efficiency. More trades do not remove structural frictions.
- Price clears on structure. Performance frames value. Issuer and shareholder rights, approvals, and process set the clearing price.
- Liquidity is episodic. Volume exists in tenders and negotiated blocks, not a continuous order book.
Why it Stays Inefficient
- Company approvals. Issuers have oversight over who can sell, when, and on what terms.
- Selective information. Data is permissioned. New investors must often work with partial or stale data.
- Non-uniform instruments. Preferred shares, common stock, options/RSUs, and other classes bear different rights and characteristics. They are not interchangeable and information is asymmetric – price and return profiles can vary widely between classes.
- Process risk. Timelines and settlement steps vary deal by deal.
How Liquidity Actually Happens
Tenders and pre-IPO rounds allow an issuer to manage the cap table and preserve control. Public-company obligations (SOX, audits, quarterly reporting) reinforce private companies’ preference for this confidential, controlled process. Selective secondary liquidity is the simpler interim solution. Recent employee tenders at marquee issuers follow this pattern: sizable liquidity, tightly run, invitation-only.
Why it Matters
Secondary volumes will continue to rise – efficiency will not. Structural frictions (including issuer consent, selective information rights, non-uniform instruments, and episodic processes) sustain pricing dispersion. Advantage accrues to investors with issuer relationships, deliberate security selection, underwriting access, and the operational capacity to execute across transaction sizes and timelines. Complexity and opacity are and will remain hallmarks of private secondary markets, and require deep relationships and expertise to navigate successfully.
