The secondary market is the space where investors who already participate in private equity funds can sell their sell their participation (known as LP-led), or where the fund manager himself creates a new vehicle to continue new vehicle to further develop successful companies (GP-led).

In simple terms, it is a way to provide liquidity and reorganize provide liquidity and reorganize portfolioswithout depending on the market being open for a sale or IPO.

2025: the shift from patience to active management

In recent months, the secondary market has shown greater dynamism and balance in more dynamic and balanced. Supply comes from investors seeking liquidity or to adjust their portfolios, while demand remains strong thanks to specialized funds with available capital.

This has generated more competition and better prices, especially in quality portfoliosespecially in quality portfolios, where discounts versus the real value of the funds have been shrinking. Even so, selectivity persists selectivitywith differences according to asset type, industry or country.

The number of operations called GP-ledwhere managers extend the life of well-performing companies. These processes are now more more transparent and professionalwith clear rules, independent evaluations and better conditions for investors, who can decide whether to follow or take liquidity.

As a whole, secondaries have become a tool for active management. active management tool: they make it possible to accelerate return flows, reduce waiting time y improve the quality of investmentsby prioritizing companies that truly generate value.

What is happening with the IPR?

DPI (Distributions to Paid-In) is a way of measuring how much money has returned to investors capital they originally contributed.

In recent years, this indicator has remained lower than the historical average. lower than the historical averageThe reason for this is that many companies have not yet completed their sale or IPO. This means that a significant portion of the value is still "on paper" within the funds. within the funds.

This is where the secondary market has gained strength:

• The LP-led allow to sell shares and free up liquidity without waiting for a traditional exit.
• The GP-led offer an orderly continuity to continue to leverage the potential of the best assets, while maintaining exit options for those who prefer not to continue.

In practice, secondaries are functioning as a liquidity bridge. liquidity bridge that helps smooth returns and maintain the pace of distributions maintain the pace of distributions while the primary while the primary outflow market normalizes.

If 2021 was the year of "speed", 2025 is the year of management and discipline. management and discipline. The Private Equity secondary market makes it possible to move from passive patience to an active strategy. to move from passive patience to an active strategystrategy, which seeks to transforming value into cash flow, order portfolios y keep the focus on the real drivers of growth..

DISCLAIMER 

Juan Manuel Alessandrini
International Funds Analyst Fynsa AGF