Research & Insights
Market insights and data-driven analysis on private markets, venture capital, and secondary market opportunities
State of the Private Markets
The private markets navigated a complex environment in 2024, with fundraising across all asset classes falling to its lowest level since 2016 as investors adjusted to persistently high interest rates and broader macroeconomic uncertainty. Despite the slowdown in capital raised, deployment across asset classes rebounded, with deal activity rising by double digits—a sign that fund managers are adapting to new market realities.
Zooming in, venture capital (VC) fundraising efforts have slowed down significantly over the past couple of years. After reaching peaks of $755.12 billion and $780.65 billion in 2021 and 2022, VC funds managed to raise $531.06 billion in 2024, reflecting a 32% decline from the peak. This slowdown is indicative of broader market challenges, including delayed interest rate cuts, persistent inflation, increased investor caution, sluggish IPO activity, and continued pressure on startups.
Source: PitchBook Data, Downloaded May 23, 2025
However, the venture landscape has evolved considerably compared to over a decade ago, when annual venture funding from 2006 through 2014 averaged around $163 billion. The growth in available venture capital has allowed companies to stay private longer, avoiding the costs and volatility sometimes associated with public listings. As of 2024, the universe of publicly traded companies in the U.S. had shrunk to just under 4,000, a decline of about 50% since the mid-1990s.
A significant challenge in the venture market has been the exit environment, particularly for public listings. Since 2021, the IPO market has cooled down considerably, causing a large number of companies to stay private for longer than expected. As of early 2025, PitchBook data indicates that over 600 venture-backed U.S. companies are valued at $1 billion or more and may be waiting for more favorable circumstances before considering launching IPOs—a sharp increase from 288 companies in similar situations just a few years prior.
Source: EY, April 2025
Secondary Market: The Sell-Side
The secondary market offers a notable solution for fund managers (General Partners or GPs), fund investors (Limited Partners or LPs), and even employees of private companies to obtain liquidity by selling their ownership in illiquid assets. This market has evolved over the years from a niche segment to a more mainstream asset class with a global presence.
In 2024, global secondary market volume hit a record $162 billion, up 45% from the prior year, driven by strong liquidity needs from LPs and GPs and improving public market performance. Looking ahead, total secondary volume is projected to rise to $185 billion in 2025.
Source: Jefferies, Global Secondary Market Review, January 2025, January 2023, and 1H 2021
Secondary Market: The Buy-Side
The buy-side of the secondary market continues to target high-quality assets at favorable valuations as sellers seek liquidity and rebalance portfolios. Pricing across the broader market rose steadily in 2024, with average LP portfolios trading at 89% of net asset value (NAV), reflecting a 400-basis-point improvement from the prior year.
Venture capital, while still trailing the broader market, saw a notable rebound in buyer appetite as pricing jumped 700 basis points year-over-year.
Source: Jefferies, Global Secondary Market Review, January 2025, January 2023, and 1H 2021
Benefits of Secondary Market Investments
Portfolio Diversification
Diversify portfolios by adding companies or industry segments that aren't represented in the public markets or available through alternative private market avenues.
J-Curve Mitigation
Decreased time to return compared to other strategies, as secondary investments often bypass the initial capital deployment phase.
Discounted Pricing
Opportunities to acquire high-quality assets at favorable valuations as sellers seek liquidity and portfolio rebalancing.
Historical Performance Data
Historically, secondary funds have outperformed private equity and venture capital, averaging a median IRR of 14.87% from 2006 to 2024, compared to 10.68% for private equity and 6.60% for venture capital. While venture capital briefly outperformed in 2021, secondary funds have historically generated better returns.
Secondary funds have also exhibited lower return variance compared to venture capital and some other private equity funds, which can be explained by the Pareto principle, where a small percentage of investments drive most returns. This creates a more consistent performance profile across secondary fund strategies.
Source: PitchBook Data, Inc. & CAIS Group, Performance Dispersion in Alternative Asset Classes; November 2022
Operator Allocator
Read more essays and investor notes on Operator Allocator — Zain's newsletter on angel investing, secondary markets, and the private tech ecosystem.
Subscribe on SubstackImportant Disclaimers
Excludes external factors such as inflation and cost of capital. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio.
The secondary funds' returns data may include returns from secondary investment strategies materially different than the Fund Managers'. For example, the returns data presented herein may reflect secondary funds holding positions in individual companies and in other private capital funds. There can be no assurance the Fund Manager's investment strategy, among many other factors, will guarantee any return.