Secondaries: What We Saw in 2024, and What We Expect in 2025

Coming off the year-end closings, Ropes & Gray’s global secondaries team recently gathered to discuss our predictions for 2025. We've set out some of our insights here:

Trends from 2024

• The last year witnessed dramatic growth of evergreen products, and we’d expect that trend to continue in 2025. Indeed, several secondary buyers are already considering more focused evergreen strategies and many secondary buyers are actively thinking about how to access retail capital around the globe. One open question will be whether 2025 brings an entry to the 401(k) markets and/or access to retail investors more broadly. 
• Market acceptance of GP-led fund restructurings seems to be here to stay. Indeed, when considering exit options for a portfolio company many GPs are now automatically considering a GP-led alongside other exit options such a straight sale.  A GP-led restructuring may give the GP additional time to realize the portfolio (and even to infuse additional cash, as needed). 
• One trend from 2024 that it will be interesting to see if it continues, has been the relatively higher roll volume in GP-led fund recapitalizations. It’s unclear if the higher roll volumes are driven by:
  • LPs’ perceptions of relative asset quality (both because top tier GPs have embraced these deals and because they’re including trophy assets in their GP-leds);
  • LPs’ acknowledging the fact that secondary buyers themselves are aiming to achieve PE-level returns on their deals; or
  • LPs no longer feeling as capital constrained because exit activity has started to uptick.
• Infrastructure funds have accounted for a growing percentage of GP-led activity in recent years and, in particular, over 2024. By contrast, real estate GP-leds (like the asset class more generally) have been comparatively depressed. Not surprisingly, spreads are very asset class-dependent, as well.
• We’ve seen increased deal activity in Europe as compared with 2023. Asian activity has been more mixed and geography dependent, but is trending upwards. We’d predict growth in both markets in 2025.
• Preferred equity and other structured solutions: we’ve seen ongoing innovation and increased adoption in this segment of the market, though it remains a small minority of overall volume. In our view there’s meaningful untapped potential. We are also seeing a number of new products such as collateralized fund obligations and other securitized structures.  As an example, Ropes & Gray advised on the AlpInvest CFO. 
• The more challenging fundraising environment for PE fundraising, coupled with the downtick in exit activity, has driven interest in fund financing for higher GP commitments, and many of our secondary buyers have been providing this capital through their portfolio financing vehicles.

Predictions for 2025

• Coming off of another robust year of secondaries volume in 2024, if anything we expect deal volume to be even higher in 2025. Going into Q1, many of our secondary buyers have very robust pipelines of GP-led transactions, with a good mix of multi-asset and single-asset deals.
• Continued focus by secondary buyers on asset class-specific strategies (for example, funds focused solely on infrastructure secondaries) and/or funds focused on discrete deal types (such as single asset recaps). Indeed, a number of PE managers have launched (or are in the process of launching) single asset recap strategies as a complementary product to their flagship buyout strategy. Many mega investors see these strategies as providing the same benefits for their broader portfolios as their positions in PE secondaries funds have historically. 
• Over the past few years IPO activity and deal volume in the PE markets has been comparatively depressed, although that seems to be shifting. Even with anticipated higher deal volume, however, we do anticipate that secondaries deal volume will continue to grow given the market acceptance of GP-led transactions as an alternative exit opportunity. Indeed, when considering exit options for a portfolio company many GPs are now automatically considering a GP-led alongside other exit options such a straight sale.  A GP-led restructuring may give the GP additional time to realize the portfolio (and even to infuse additional cash, as needed). 
• The incoming Trump administration is expected to have a broadly deregulatory posture, but key initiatives remain murky. It is also unclear how, if at all, this will impact the broader secondaries market. Incoming SEC chair Paul Atkins is generally understood to have a pro-free market, deregulatory approach. It also remains to be seen how the cloudy picture for interest rates, inflation and tariffs, as well as some broader geopolitical uncertainty, will impact the secondaries markets.

In case you missed it

We provided insights on a range of secondaries market trends in 2024.  As a recap, here are some selected highlights:

• Venture capital secondaries (and additional article)
• Retailization 
• Middle-market insights
• Credit fund insights
• Evolution of ESG in secondaries

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