Secondary deals succeed when GPs communicate valuation and alignment with clarity, not just strong assets.
Jan 8, 2026, 12:00 AM
Written by:
Niko Ludwig
Table of Contents
Key Takeaways:
Secondaries have become strategic, not reactive. What began as liquidity relief now serves as a deliberate portfolio-management tool across private markets.
Clarity and transparency drive investor confidence. Success in secondary transactions depends less on asset quality and more on how clearly managers explain valuation, governance, and alignment.
Institutional-quality materials are a competitive advantage. GPs that produce data-driven, transparent materials gain LP trust and shorten transaction timelines, while weaker communication invites skepticism.
Communication readiness defines long-term fundraising strength.
As allocators apply stricter standards, firms that adopt repeatable, transparent communication frameworks will sustain both transaction success and future capital access.
If your LPs are pressing for distributions while your best-performing assets still need time, you're not alone, and you still have strategic flexibility. Across private markets, managers are using secondary transactions to ease liquidity pressures, extend value creation timelines, and manage portfolio performance more strategically. Yet the gap between a successful continuation vehicle and a rejected one often comes down to communication quality, not asset fundamentals.
Just a few years ago, secondaries were seen as distress tools used when funds were in trouble or investors needed emergency liquidity. The secondary market reached $134 billion in transaction volume in 2023, with GP-led transactions now representing approximately 55% of total activity.
The normalization is quantifiable: Jefferies on Market Evolution wrote that “continuation funds now represent 14% of all private equity exits globally, up from just 5% in 2021, signaling their evolution from distress tool to standard exit pathway.”
This is a dramatic shift from the LP-led transactions and reflects a broader change: continuation funds now function as mainstream portfolio-management tools, not rescue mechanics.
GP-led secondaries let managers continue managing high-performing assets beyond original fund terms while offering LPs optional liquidity. The average hold period for PE-backed companies has extended to 6.8 years, up from 4.5 years a decade ago, creating timing friction that makes extension mechanisms increasingly necessary. LPs, however, remain alert to whether extension requests reflect real value-creation potential or hesitation to crystallize losses.
The shift in LP attitudes is palpable. “For LPs there is way more acceptance of using secondaries to manage portfolios,” notes David Lippin, One Equity Partners' head of investor relations. “There used to be a stigma but now it is a normal way to trim exposure.” Yet acceptance doesn't mean complacency. LPs still demand rigorous proof that any specific transaction serves their interests.
This tension sets up the core question this article addresses: how do GPs communicate secondaries in a way that earns allocator confidence?
Distribution pressure drives many secondary conversations, but motivations are broader. In 2021 and 2022, continuation funds comprised over 80% of all GP-led secondaries, with total deal value exceeding $50 billion.
Three dynamics explain this shift:
Market timing: exits during valuation troughs destroys value that patient capital could capture.
Asset momentum: High-performing companies often have unfinished roadmaps or regulatory milestones that require longer horizons.
Economic alignment: Although fee structures create real incentives, they can align interests when pricing and governance are transparent.
Campbell Luytens on Single-Asset Growth commented: “The scale of this shift is dramatic. Single-asset continuation funds nearly doubled in volume year-over-year to reach $36 billion in 2024 reflecting GP conviction that their best assets deserve extended runways rather than forced exits into uncertain markets.”
For LPs, this raises the question of whether continuation structures reflect sound portfolio strategy or disguised fee-timing optimization. This is where communication becomes decisive.
What LPs evaluate when reviewing secondary proposals
Allocators assess continuation fund proposals using a consistent framework, regardless of relationship history or manager reputation. ILPA's best practice guidelines for GP-led secondaries emphasize independent valuation, genuine LP choice in opt-in/opt-out structures, and transparent governance provisions.
LP scrutiny typically focuses on:
Valuation methodology: third-party fairness opinions and transparent pricing assumptions.
Track record of prior GP-led deals: whether earlier continuation funds delivered projected returns.
Governance protections: advisory committee structure, reporting, and conflict-management processes.
Exit rationale: how current timing differs from original underwriting.
Data from secondary market surveys shows that many existing LPs choose to cash out rather than roll into continuation funds, often because governance protections feel inadequate or prior transactions underperformed.
In short, LPs back proposals that demonstrate changed circumstances, credible valuation logic, and alignment safeguards.
What does good communication in GP-led secondaries look like?
The baseline standard LPs expect
Executive summaries must address LP concerns directly rather than leading with opportunity framing.
Valuation logic and methodologies belong in main sections, not buried in appendices where allocators assume managers are hiding assumptions.
Governance protections require explicit articulation: LP advisory committee representation, reporting standards, performance measurement frameworks.
Sensitivity analyses across multiple scenarios, not just a base-case.
“Since the GP is on both sides, there will always be a healthy dose of skepticism,” notes Fadi Samman, a partner at Akin. “As LPs have gotten smarter, they've pushed GPs to have better governance.” This evolution explains why standardized governance frameworks have become table stakes rather than differentiators"
What effective communication looks like
A robust investor presentation with detailed sensitivity analysis, clear governance protections, and transparent discussion of conflict management is more likely to get approval than a 12-slide deck with summary financials and generic language about "alignment of interests."
Communication discipline makes the difference.
What typically goes wrong?
Common communication failures include:
Generic fundraising-style decks repurposed for secondaries
Insufficient detail forcing multiple follow-ups
Defensive language that avoids addressing conflicts
Lack of third-party validation
These gaps signal that the GP has not invested in credibility, which LPs interpret as a red flag.
The growing gap in institutional readiness
Not all firms are equally prepared to communicate complex transactions at institutional standards. Large managers with dedicated investor relations teams produce materials that reflect years of allocator feedback and regulatory scrutiny. Mid-market firms often lack those resources, creating quality gaps that allocators notice immediately.
Institutional-quality materials include detailed financial models with transparent assumptions, sensitivity analyses that test multiple scenarios, governance frameworks that specify LP rights and protections, and clear articulation of how conflicts are managed. While specific approval rate data varies by transaction, industry guidance consistently emphasizes that comprehensive materials and transparent processes are fundamental to earning LP confidence.
The distinction matters more as secondaries become common. Allocators increasingly compare proposals across their portfolios, applying consistent evaluation criteria regardless of manager relationships. Firms that produce institutional-quality materials gain competitive advantages not just in individual transactions but in long-term fundraising relationships.
What comes next for secondary markets
“The secondaries market has evolved from a niche liquidity tool into a core pillar of the private equity ecosystem,” according to Chris Perriello, Partner and Global Head of Secondaries at Carlyle AlpInvest.
Secondary transaction volume reached $162 billion in 2024, driven by aging fund portfolios, extended hold periods, and continued distribution pressure across strategies.
Three trends will shape how managers approach these transactions:
1. Regulatory scrutiny is increasing.
The SEC's focus on conflicts in GP-led transactions means disclosure standards will continue rising. Firms that establish transparent communication practices now will find themselves better positioned than those forced to adapt under regulatory pressure.
2. Term standardization is emerging.
As allocators evaluate more continuation fund proposals, they're developing consistent expectations around governance provisions, reporting requirements, and fairness processes.
Managers who anticipate these standards rather than negotiating them transaction-by-transaction will accelerate deal timelines.
3. Communication quality is becoming a screening tool.
Allocators facing multiple secondary proposals across portfolios will use materials quality as an early filter.
Poorly explained transactions won't receive detailed evaluation regardless of underlying asset quality. Communication quality now influences both transaction outcomes and long-term fundraising capacity. The implications are straightforward: Managers who standardize communication frameworks now will move faster when deal volume accelerates again.
Bottom line
Secondaries are no longer a sign of distress but a test of communication quality. GPs who can articulate rationale, governance, and alignment transparently are the ones earning LP trust and repeat capital.
The market has normalized continuation funds as portfolio management tools, but communication standards haven't kept pace with transaction volume. Allocators remain skeptical not because secondary structures are inherently problematic, but because many managers haven't invested in communication collateral that meet institutional transparency expectations.
That gap creates opportunity: firms prepared with clear narratives and professional documentation differentiate themselves in conversations where LPs default to caution.
Ask yourself: would my materials meet allocator expectations if I proposed a continuation vehicle tomorrow? If not, it's time to bring your story up to institutional clarity standards.
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