The trend of LPs and GPs turning to secondary transactions amid a challenging distributions environment remained intact through the start of 2026, placement agent and secondary advisor Elm Capital says.
The firm’s latest Private Markets Review trends report said 2025’s themes are continuing, with LPs exploring sales of older vintages and legacy fund positions, while also opportunistically bringing younger vintages to market when strong buyer demand allows for attractive pricing levels.
The report added that the range of asset classes represented in secondary transactions continues to broaden, with investors increasingly bringing private credit fund positions to the secondary market, as well as growth, VC, fund of funds and secondaries funds themselves appearing more frequently within broader LP portfolio sales.
That opportunity has emerged as primary private equity fundraising continues to adjust to a more constrained liquidity environment, Elm said.
The Private Markets Report points out that while investor appetite for the asset class remains intact, LP capacity to recycle capital into new commitments has slowed, reshaping how and where funds are raised.
It said, “For managers seeking capital today, the message is clear: fundraising is increasingly about distributions, differentiation and disciplined positioning.”
It added that the overarching dynamic for private equity across both Europe and North America is the slowdown in liquidity, with exit markets still below post-Covid peaks of 2021, “IPO activity muted and large cap sponsor exits slow to materialise”.
The report said, “Over half of investors report constraints on making new commitments driven by post-Covid fundraising not yet being fully drawn, the significant expansion of GP relationships over the last decade, and insufficient distributions from older vintages.
“Lower mid-market managers can benefit from this dynamic. Their portfolio companies appeal to a broader buyer universe, including larger sponsors seeking platforms or add-ons and strategic acquirers, typically at below-market multiples.
“This creates more flexible exit optionality compared with larger assets, which often rely on a narrower set of buyers, public listings or large continuation vehicles.”
Elm said that on the demand side, competition for high-quality funds and well-performing managers remains strong, with secondary buyers showing significant appetite for established buyout funds and diversified portfolios.
It said, “Across 2025 and into early 2026, we observed significant price uplifts between Round I and Round II in the processes we managed. Price deferrals were a common feature of our transactions with price increases between 2% and 4%, depending on the quantum and length of the deferral.
“Overall, while macroeconomic uncertainty and public market volatility are likely to persist, the continued institutionalisation of the market, the expansion of the buyer universe and the diversification of assets represented in transactions should continue to support steady deal flow and broadly stable pricing in the secondary market throughout 2026.”
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