Secondaries in 2026: continued growth on the horizon

A look back at 2025

Consistent with Torys’ 2025 outlook, the private fund secondaries market had yet another record year in 2025. Secondaries transaction value in 2025 totalled $226 billion¹, marked by continued growth on both the LP-led side and the GP-led side and far outstripping the prior $160 billion record year in 2024. On the LP-led side, secondary investors saw plenty of opportunities for both large and small transactions, with notable processes hitting the market throughout the year involving prominent U.S. university endowments, state pension plans and sovereign wealth investors. The GP-led market also remained hot—with continuation funds now representing around one-in-five sponsor-backed private equity exits², suggesting strong investor appetite for these deals even against the backdrop of a stronger year for M&A transactions. Transaction volume for 2025 was fairly evenly split between LP-led and GP-led processes, with LP-led transactions accounting for $120 billion of total deal flow and GP-led transactions representing the balance.

Drivers to watch in 2026

In many respects, 2025 can be described as a year of two halves, with early uncertainty following the Trump Administration’s tariff measures giving way to strengthening economic activity throughout the year. Despite the momentum in M&A markets towards the latter half of the year, IPO markets remained sluggish and the M&A boom skewed towards the large-cap space, giving modest relief to private market investors experiencing a “distribution drought”.

It remains to be seen how the M&A middle market will perform in 2026. Although there is significant optimism that exits will start to become available for private equity sponsors as we move into the new year, a number of factors support the expectation of another banner year for secondaries in 2026.

Growing market sophistication

In the mid-market, fund sponsors are increasingly exploring non-traditional liquidity solutions rather than outright exits from their portfolio assets. Pension investors and other institutions also continue to grow more comfortable exploring LP-led processes on both the buy- and sell-side as muscle memory in this space expands.

All eyes on DPI

As has been widely reported, investors in private equity funds are laser-focused on distributed to paid-in capital (DPI) as a key metric for evaluating and selecting fund managers. Amid the challenging exit environment of the past few years, the “PE overhang” has grown; according to Pitchbook, about 40% of buyout fund NAV is aged at over seven years, with an exit backlog estimated at $100 billion³. To unclog that pipeline would require a significant uptick in traditional exit activity, meaning secondaries markets remain well positioned in 2026 for continued growth.

Retail rising

The impact of retail funds on the secondaries space (notably, registered ’40 Act funds in the United States) remains one of the most important trends the market must digest. We observed strong LP-led pricing throughout the year, likely buoyed by competition from retail fund buyers. It remains to be seen how these funds may alter the secondaries landscape going forward, but several factors suggest that retail funds are here to stay in this space. Secondaries (and LP-led portfolio acquisitions specifically) are considered well suited to retail investors due to their closer proximity to distribution activity. The diversified nature of these portfolios is also attractive for retail as it provides a retroactive exposure to historical vintages of private equity funds. While no portfolio is without risk, market participants argue that the market exposure for retail funds aimed at the private markets is more than a match for the diversified exposure available through public market trackers (notably, the top 10 stocks in the S&P 500 currently comprise around 36% of that index⁴). We similarly expect retail investors’ appetite to grow for multi-asset continuation funds, which also provide attractive diversified exposure to private assets.

Capital constraints

Dry powder in secondaries funds remains a limiting factor for the growth of the secondaries markets, with dry powder estimated at approximately $215 billion now falling below total deal volume in 2025⁵, showing significant room to run for the secondaries space from a capitalization perspective when compared to the far more robust capital overhang in other private asset classes. Unsurprisingly, we have also seen significant growth in secondaries fundraising in recent years, with funds aimed at the strategy representing nearly 20% of all private equity fundraising by total capital raised last year⁶. It is likely that this trend will continue given the drivers we’ve described, and the resulting entrenchment of secondaries into the investment strategies of sponsors and investors alike.

All told, our expectation is that 2026 will be a year of growth in the secondaries space, where an ongoing backlog of distribution activity will continue to compel sponsors and investors seeking liquidity toward secondaries markets.