There’s one corner of the private investment world benefiting from the Trump bump going bust: Secondaries.
“Secondaries” professionals buy stakes in privately held funds from investors looking to cash out early. They have been busy of late, closing a record $162 billion in deals last year, according to asset manager BlackRock. Demand could ratchet up again this year as investors look to raise cash to protect against the financial fallout of some of Trump’s policies.
“I always joke there aren’t any bad times for secondaries,” Matthew Roche, a partner at secondaries firm StepStone told BI. “There are some really good times for secondaries, and this is one of them.”
Uncertainty around Trump’s tariffs has slowed already sluggish dealmaking, which is expected to lead to even more private equity investors looking to exit funds that have yet to make distributions. Large investors could also turn to the secondaries market to raise cash in the face of a volatile stock market
It’s not just tariffs. The endowments of Harvard and Yale are in the process of selling private equity stakes amid a federal crackdown on university funding. While Harvard’s sales process began last fall, according to someone with knowledge of the sale, and Yale said it’s been in process “for many months,” the sales come at a time of growing uncertainty for university finances.
As this niche industry takes center stage, it raises questions about the people and firms behind the deals. What firms specialize in secondaries investments? What is the job like, and how does it differ from other financial industry jobs?
We spoke to investors, recruiters, and a lawyer with deep secondaries experience to understand what private equity’s hottest strategy does every day.
The firms
The secondary market has existed almost as long as private equity itself, but it was long viewed as a fringe strategy. Nowadays, it’s considered a core strategy, making up the bulk of assets for some firms, including French private equity firm Ardian, which boasts the world’s largest secondaries platform, north of $97 billion in assets managed. Other key players include Lexington Partners, HarbourVest, and StepStone.
It’s also become a must-have strategy for any megafund, with Apollo raising $5.4 billion in a debut fund that closed this year. Blackstone, which acquired its secondaries business, Strategic Partners, from Credit Suisse in 2013, is now the second-largest secondaries investor in the world. Goldman Sachs’ asset management unit also has a fund.
Secondaries investors are a category of private-equity professional, but rather than finding companies to turn around, they are responsible for locating, assessing, and executing private fund transactions, sometimes with the help of investment banks like Evercore or Jefferies.
Like other private equity pros, they are using money raised from investors. The secondaries industry raised a record $50 billion in the first three months of the year, according to Preqin. The goal is to buy shares at a discount to their future value.
The traditional secondaries deal is led by investors looking to cash out. These deals are known as “LP-led” deals. Increasingly, the industry has been transacting deals on behalf of buyout firm sponsors, known as “GP-led” deals, as more private equity firms struggle to make distributions to impatient investors.
The pace
The secondaries business is “fast-paced,” said Keith Brittain, cohead of Hamilton Lane’s $24 billion secondaries platform.
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It’s not high-frequency trading, as deals can take weeks or months from start to finish, but there are many more transactions in secondaries than in the world of corporate buyouts.
“Even in a two-year associate program at a traditional large/mega fund buyout, you’re lucky if you get to see one deal from start to finish,” said Alix Connors, a principal at recruiting firm Opus Advisors.
Roche said some incoming associates at StepStone came to the firm for a change of pace
“Our recent junior hires appreciate that every day can be different: different sponsors, different sectors, and different companies, with many active deals at all times,” Roche said.
Holly McCarthy, founder of Opus Advisors, compared the workload to a “sample platter” of “sizes, sectors, and strategies.””You can work on a tech venture deal in the morning, a megafund buyout deal by lunch, and a real estate deal in the afternoon,” McCarthy said.
The hours
Secondaries can also offer a bit more work-life balance than corporate buyout investing.
“You have a bit more control over your calendar,” McCarthy said.
Connors said buyouts can be a bit like “banking 2.0” with a highly demanding, intense workload. Secondaries offer more “predictability,” she said, though the recent increase in activity has likely led to longer hours.
And while the pay is below that of a buyout fund star, it’s not by much.
“You might earn slightly less, but the trade-off in deal reps and lifestyle is worth it,” McCarthy said.
But don’t expect that you’re going to always be home for dinner. Schedules can still be “inconsistent,” said Brittain. “Like many transaction and investment-oriented jobs, you don’t always have control of timelines.”
The deals
The secondary investor is focused primarily on financial modeling, research, and closing deals. It’s for those who want to underwrite versus meeting with CEOs and running businesses.
Brittain said secondary investors who buy a share of a fund must do financial due diligence on the overall fund, including the deals in the fund and the private equity manager.
On the GP-led side, diligence is even more thorough.
“You’re not underwriting 20 assets or 200 assets, you’re underwriting one or a small number of companies,” Brittain said.
You also get a chance to look under the hood of other private equity firms.”You have to underwrite the quality of the GP,” Brittain said. “Can they buy well? Can they exit well?”
