Riding the Second Wave: The Evolution of Secondary Private Equity and the Middle East's Emerging Landscape
- Oliver Kirkbright
- Mar 20
- 3 min read
The secondary private equity market has evolved significantly from its nascent stages to become a vital component of the global investment landscape. Initially, secondary transactions were primarily driven by limited partners (LPs) seeking liquidity from their private equity fund commitments, often due to unforeseen circumstances or portfolio rebalancing needs. These early deals were often characterised by discounted valuations, reflecting the illiquid nature of private equity assets. However, as the market matured, secondary transactions began to encompass a broader range of strategies and participants. General partners (GPs) started to utilise secondaries to manage their portfolios, providing liquidity to existing investors while retaining promising assets through continuation funds. This evolution has transformed secondaries from a mere liquidity tool to a strategic portfolio management mechanism.
Globally, the growth of the secondary market has been propelled by several key drivers. The increasing scale of private equity fundraising has led to a larger pool of outstanding commitments, creating fertile ground for secondary transactions. Furthermore, the extended holding periods of private equity investments, coupled with the desire for portfolio diversification, have fuelled the demand for liquidity. The rise of GP-led secondaries, particularly continuation funds, has added another dimension to the market, allowing GPs to extend the life of successful investments and generate further value. Notably, 2024 witnessed record-breaking activity in the secondary market, solidifying its importance. According to Lazard, the year was the "busiest on record" for secondary players, with total deal volumes reaching $152 billion. This surge was underscored by significant growth in the first half of the year, where transaction volumes hit $68 billion, a 58% increase compared to the previous year. This momentum is expected to continue well into 2025, indicating a sustained period of high activity.
Several key trends have emerged over the last 12 months that highlight the increasing sophistication of the secondary market. The rise in LP-led deals signifies a strategic shift, with LPs using secondaries not just for liquidity but as an effective portfolio management tool. GP-led secondaries also continued their ascent, demonstrating their prominence in the market. A heightened focus on quality became evident, with secondary investors prioritising high-quality assets, leading to an overall improvement in deal quality. Additionally, semi-liquid secondary funds are emerging as a compelling option, offering investors more frequent redemption opportunities while maintaining exposure to high-value private equity assets. The trend toward semi-liquid funds is a clear indication of investors looking for increased flexibility.
Within this global context, the Gulf Cooperation Council (GCC) presents a unique and compelling narrative. Unlike the established markets of Europe and the United States, the GCC's private capital ecosystem is primarily shaped by family offices and sovereign wealth funds, guided by strategic government visions. This distinct investor profile is a significant catalyst for the region's burgeoning secondary market. Governments across the GCC are actively promoting private capital investments through regulated funds, driving infrastructure development and strategic privatisation initiatives. The region is witnessing a surge in private capital across various asset classes, including private equity, venture capital, and real estate, fuelled by a robust IPO market and a thriving venture capital scene. The GCC's focus on economic diversification is a key driver of private capital growth; as the GCC's private capital landscape matures, the demand for liquidity solutions is intensifying, making secondary transactions increasingly relevant.
The evolution of secondary investing in the GCC is also characterised by the growing sophistication of regional investors. Both LP-led and GP-led secondaries are gaining traction, reflecting a desire for dynamic portfolio management and strategic asset retention. While the region faces challenges, such as navigating global economic uncertainties and ensuring transparency in complex transactions, the long-term outlook for secondary private equity in the GCC remains promising. The increasing need for liquidity, coupled with the rising sophistication of regional investors and the strategic initiatives of governments, suggests that the GCC will play an increasingly prominent role in the global secondary market. As the region continues to develop its private capital infrastructure and refine its regulatory framework, it is poised to become a key hub for secondary transactions, contributing to the broader evolution of this dynamic asset class.
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