What is the secondary market and why is it important to investors?

The secondary market is where investors buy and sell existing assets, such as shares or fund stakes, from other holders rather than from the issuer. For a private-market investor it is the main way to sell a stake before an IPO or a sale of the company, and a way to buy in after a funding round closes.

What is the secondary market?

It is any market where an asset changes hands between investors after it was first issued. The issuer is not a party to the trade and receives no money from it.

Investor.gov defines secondary markets as markets where existing securities are bought and sold. A stock exchange is the most familiar one: when you buy a listed share through a broker, you buy it from another investor. Private companies have no exchange, so each secondary trade is found and negotiated separately. How this differs from a company raising new money is explained in primary vs secondary market.

What kinds of secondary deals exist in private markets?

There are four main types. They differ in what is sold and who starts the deal.

In a continuation vehicle the manager keeps an asset it wants to hold for longer, and the fund's investors choose between cash from the new buyers and rolling their stake into the new vehicle. Tender offers are covered in tender offer: what it means for a pre-IPO investor.

Who sells and who buys on the secondary market?

Sellers usually need cash or want to reduce a position. Buyers want access to a company or a fund, sometimes at a price below its stated value.

• Sellers. Employees and founders, early investors and venture funds, and fund investors who want to rebalance.
• Secondary funds. Jefferies puts their available capital at $290 billion at the end of June 2026; capital dedicated to US venture secondaries was $11.8 billion in June 2025, by PitchBook's estimate.
• Evergreen funds and individuals. Jefferies names evergreen funds sold to individual investors as a growing source of capital; individuals, usually accredited investors, also buy through marketplaces, brokers or special purpose vehicles (SPVs).

Why does the secondary market matter to an investor?

Because a private investment has no set exit date, and a secondary sale is the one exit a holder can start without waiting for the company.

• An exit before an IPO or a sale. A holder can sell when they need cash, provided there is a buyer and the company agrees to the transfer. The other routes are compared in how to exit a pre-IPO deal.
• Cash when distributions are slow. Jefferies writes that fund investors mainly used the secondary market to raise liquidity in the first half of 2026: the annual distribution yield of their portfolios stayed near 10%, against a historical average of 25% since 2001.
• A way in after the round. A buyer can get a stake in a company whose round is closed or that raises money rarely.
• A price between rounds. Each trade shows what a buyer paid on a given date, which may differ from the last round's valuation.

How are secondary prices set?

By negotiation between seller and buyer. For a company's shares the reference point is usually the last funding round; for a fund stake it is the net asset value (NAV) reported by the manager.

According to the Jefferies Global Secondary Market Review, fund stakes sold in the first half of 2026 at an average of 87% of NAV: 91% for buyout funds and 79% for venture funds. Portfolios with category-leading, AI-related companies were in strongest demand and often traded at single-digit discounts, while software-heavy and early-stage venture portfolios faced wider ones.

A single company's shares can trade above or below the last round. Discounts by the age of the last round are covered in how private market liquidity differs from the public market.

How big is the secondary market?

It is large and growing, but trading is concentrated in a small number of funds and companies.

Jefferies counted a record $118 billion of global secondary deals in the first half of 2026, against $103 billion a year earlier and $240 billion for the whole of 2025. GP-led deals made up 53%, the first majority since 2021. These figures cover private funds, not single startups.

For startups, the PitchBook 2025 Annual US VC Secondary Market Watch estimates direct secondary trades in US venture-backed companies at $62.5–120.9 billion in 2025, a wide range because the market is opaque; with GP-led venture deals, the total is $106.3 billion. On the Hiive marketplace, the top 20 startups accounted for 86.4% of secondary trading value in the fourth quarter of 2025.

What are the risks of buying or selling on the secondary market?

The secondary market reduces illiquidity but does not remove it, and it adds risks of its own.

• No guaranteed buyer. FINRA warns that exit options from pre-IPO investments can be significantly limited because there is no readily available secondary market.
• Company approval. Many private companies must approve any transfer of their shares; FINRA notes that without approval the transaction might be void and the buyer might not own the stock.
• Price at sale. A seller who needs cash quickly, or holds a less popular asset, may have to accept a deep discount to the stated value.
• Ownership and markups. The SEC warns that in pre-IPO scams sellers may not own the shares they offer and may charge exorbitant, undisclosed markups.
• Layers and costs. Through a fund or SPV an investor can be several layers removed from the shares, and FINRA notes that acquiring such interests may involve significant costs.