Market comment on behalf of Mindaugas Suklevicius - Founder and Fund Manager at HF Quarters
Private equity liquidity has become a more active topic as we enter 2026, reflecting investors' close attention to cash flows, distributions, and portfolio construction. One clear signal is the pace of secondaries growth as their volumes continue to increase. Volumes reached USD 226 billion in 2025, a 41% increase compared to the previous year.
The market tends to rely on two main structures, depending on the type of liquidity required. LP secondaries are the simplest structure. A limited partner sells an existing fund interest to a buyer. At a high level, the pricing is commonly negotiated around reported net asset value (NAV). Outcomes are typically shaped by the buyer's view of underlying assets and the seller's timing. As a result, discounts can appear when liquidity is the priority, and buyers are selective.
Continuation vehicles are different as a General partner (GP) selects assets from an existing fund and transfers them into a new affiliated vehicle. Existing investors are typically offered a choice to sell at the transaction price or roll into the new structure. The Financial Times reported that in 2025, roughly 20% of all private equity sales involved continuation vehicles, up from about 12%-13% the year before, showing the structure's growing popularity.
Because the GP sits on both sides of a continuation transaction, process and conflicts management are central. ILPA's guidance highlights LPAC review of structure and conflicts as important. ILPA also states that conflicts should be identified, mitigated, and approved by the LPAC, with the review aimed at ensuring the process is transparent and fair to existing investors.
In a market where liquidity is being watched more closely, execution details become a differentiator. At the same time, the rise in secondaries volumes provide an important exit route for investors, helping limit the risks and necessity of discounts.
