Insights Blog - RE

The Future of Secondaries: Insights from Cari Lodge (CF Private Equity)

Written by Melissa Smith | Oct 3, 2024 5:28:08 AM

The secondary market for private equity has long been viewed as a niche sector. However, recent trends and developments suggest that this perception is rapidly changing, and significant growth in the secondary market is not just possible—it is imminent. Cari Lodge, Managing Director at CF Private Equity, highlights several key factors contributing to this anticipated expansion, including increased primary capital raised over the past decade, the emergence of new sellers, and the evolving dynamics of liquidity options for limited partners (LPs).

The secondary market is buzzing with excitement, thanks to the surge in primary capital over the last decade. With more capital flowing into private equity, the stage is set for secondary transactions to hit new heights—projected to reach $140 billion! These deals are now seen as essential tools for investors to tweak their portfolios, keeping up with market shifts and personal strategies.

What’s even more interesting? The wave of new sellers entering the scene. As investors hunt for liquidity, demand for secondary deals is rising. For general partners (GPs), GP-led secondaries offer a sweet spot—they can hold onto top-tier assets while giving limited partners (LPs) the liquidity they crave. It’s a win-win: GPs nurture high-potential companies, and LPs get the cash they need. This is making the secondary market a must-watch space in private equity.

But, there’s a catch. The secondary market is still under-resourced. Not enough capital is pouring in to seize the massive opportunities available. As Cari points out, secondary transactions only cover a fraction of the market’s net asset value (NAV). To truly unlock its potential, more capital—and more players—need to get involved.

The future? It looks bright. Over the next three to five years, the secondary market is expected to transform. As past returns speak for themselves, more investors are bound to jump in. This will not only boost liquidity options for LPs but also inject more energy into the market. GP-led deals will remain front and center, offering strategic paths to liquidity while backing high-growth companies.

The secondary market is set for explosive growth, with the potential to double or even triple in size. Investors, GPs, and LPs all stand to benefit, and it’s becoming clear that secondaries are no longer just a sideshow—they’re key players in the private equity game.

Cari will be participating at the Secondaries Investing Summit on November 20th in New York, where she will be joining a panel on 'Innovations In The GP-Led Space To Drive Higher Returns.' Join us to gain first-hand insights on the secondary market.