Takeaways from the Kline Hill Secondaries Day 2025: Innovation in the Secondary Market

Kline Hill’s 2025 Secondary Day panel brought together perspectives from Moelis, Jefferies, and PJT Partners on how the secondary market is evolving and what that means for both sponsors and limited partners (LPs). Panelists broke down some important shifts taking place in the industry and what they could mean for the remainder of 2025 and beyond. Here are my main takeaways from the discussion.

*Information in this article should not be interpreted as direct quotes from panelists. 

Market Outlook for 2025: Poised for Record Growth

The secondary market is poised for a record year in 2025, with transaction volume expected to surpass $200 billion. General Partner (GP)-led deals have already hit $90 billion through Q3, driven in part by the sustained proliferation of continuation vehicles (CVs). Single-asset CVs are seeing notable growth; a trend likely to persist into early 2025. While traditional exit routes are making multi-asset CVs less popular, single-asset deals remain in demand. Although new entrants continue to emerge, the overall sentiment is that the private equity market has matured, and growth is expected to slow. Nevertheless, the secondary market remains an important component of sponsors’ capital formation, with major opportunities in GP-led transactions.

Multi-Asset Versus Single-Asset CVs

Multi-asset CVs remain present in the market, but the main drivers behind their popularity in recent years have weakened due to the reopening of traditional exit routes. In contrast, the total addressable market for single-asset CVs is considered massive, providing sponsors the flexibility to retain ownership of prized assets. The rationale for the use of the CV process among sponsors continues to evolve with shifting market dynamics, with some utilizing processes to bolster fundraising efforts.

Shifting Focus and Market Participants

New buy-side entrants are primarily focusing on single-asset CVs, while established firms continue to value diversification. Both segments are motivated to deploy record amounts of capital (“dry powder”). In the realm of multi-asset CVs, two main types were identified: the "clean-up trade", which allows sponsors to wind down older vintage vehicles and the "franchise pivoting exercise”, allowing managers to pursue new areas of focus. And while in previous years the use of staples was common among GPs looking to secure commitments to new funds, today large multi-asset deals involving staples constitute less than 5% of all CV transactions, and stapled tenders are uncommon.

Role of Secondaries in Fundraising

While secondaries are not currently a core part of fundraising, there is heightened interest from the largest LPs to participate in CV processes, with many forming dedicated teams to pursue these opportunities. However, using CVs as a catalyst to launch fundraising has generally proven unsuccessful. The integration of CVs into the fundraising process often depends on the advisor’s structure, particularly whether they have a large primary team. The secondary market also continues to be utilized by GPs to replace investors who are uninterested in committing to new vintages.

Full Fund Restructurings

Full fund restructurings are expected to persist but will likely remain a small segment of the overall GP-led market. These scenarios are more challenging, and non-control solutions are often not of interest to potential buyers. With the IPO and M&A markets showing signs of life, LPs are increasingly advocating for traditional exits instead of supporting a fund restructuring. Market activity in this space is expected to be driven by mainly by quality companies and sponsors, though there are some opportunistic pools of capital targeting full recapitalizations of less favorable assets—an opportunity-rich but relatively risky strategy. 

Market Origination Strategies

A notable trend among new entrants, who are largely focused on single-asset CVs, is their proactive approach to origination. They initiate direct outreach to sponsors to propose CVs for specific assets, which in some cases they have been following through development for years. On the flip side, the proliferation of CVs has led some GPs to signal a willingness to run a process down the road to portfolio company management teams at the time of initial investment, indicating a desire to co-own businesses well beyond the typical 5–7-year investment period.

LP Sentiment and Evolving Exit Preferences

Despite all this, LPs remain divided on the use of CVs. Many still favor traditional exits, such as IPOs or M&A, yet a growing number are establishing in-house teams to manage CVs, adopting an “if you can’t beat them, join them” mentality. Others remain skeptical, particularly when they feel they lack the capacity to properly diligence deals brought to them. On the LP-led front, the future may see LPs more actively managing illiquid portfolios utilizing the secondary market instead of selling reactively in response to broader market conditions. 

Specialization and Future Trends

Growth in specialization is anticipated, with predictions of sector-specific pools of capital being dedicated to concentrated deals. For example, we may see buyers dedicated entirely to leading healthcare-only single-asset deals – while the incumbents continue to focus on more diversified opportunities. And while LPs do not view CVs as equivalent to traditional exit options, they can serve as a “pressure release valve” in low-DPI environments.

Deal Alignment and Success Rates

Alignment in deals was emphasized, with cross-fund investments and carry seen as mechanisms to ensure GP/LP interests are aligned. Success rates for CVs is a hotly debated topic; some estimate that over 80% close, while others suggest a two-thirds success rate (and still others look to more clearly define the concept of “success”). Panelists noted that deals often fall apart early due to misalignment on valuation or lack of clarity around sponsor motivation.

CV Performance and Structural Innovations

Tracking CV performance over time is challenging, given shifting market conditions – and the need to account for the environment in which they were launched. The concept of perpetual CV structures or “private IPOs” is emerging, particularly if the public IPO markets fail to fully rebound. Overall, panelists agreed that the largest risk to the CV market is the potential for a wave of failed deals, which could depress overall fundraising and activity and market appetite for these deals going forward.

Parting Thoughts

Attention is diversifying, with credit, real assets, infrastructure, and growth sectors experiencing rapid expansion. Advisors are aggressively pursuing these deals, and credit in particular is seeing increased transaction velocity. Most deals are closing near par, with ample capital for senior secured loans but less for opportunistic strategies. On the LP-led side, LPs have become systematic sellers, with transactions increasingly moving forward without extensive market testing.

 

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