📈  Chart of the Week 3/1/2026

By Michael Allison, CFA

On Second Thought…

For decades, venture capital operated on a simple exit playbook: build, scale, and eventually distribute gains through an IPO or strategic sale. This week’s Chart shows that exits have become “a third, a third, a surprising third”. The playbook seems to have been quietly rewritten. Secondary transactions, just 3% of exits a decade ago, now rival IPOs and M&A as a core liquidity channel.

At its core, a secondary transaction is simply the transfer of existing ownership. No new capital reaches the company. Instead, liquidity flows to founders, employees, early investors, or limited partners (LPs) who want to rebalance risk or return capital. What’s changed is not the mechanism, but the motivation and scale.

One innovation engine has been the General Partner (GP)-led continuation fund. Rather than selling crown-jewel assets into a weak IPO or M&A market, managers now roll them into new vehicles, offering existing LPs a choice: cash out or stay invested. This vehicle appears to have solved a structural mismatch: venture funds have finite lives, but great companies compound over decades. Continuation funds effectively refinance duration.

A second form, LP-led secondaries, have evolved from distress sales into portfolio management tools. Large allocators now actively shape vintage exposure, geography, and sector weightings through secondary sales.

Direct secondaries add a third layer, enabling employee liquidity programs that double as talent retention tools, a subtle but powerful shift in how private companies compete for human capital.

Macro forces accelerated the shift. When the IPO window effectively closed in 2022 and distributions evaporated, secondaries filled the void. Liquidity didn’t disappear; it rerouted.

Today’s estimated $130–150 billion annual secondary market across private assets reflects institutional acceptance, tighter pricing spreads, and specialized buyers ranging from dedicated secondary funds to sovereign wealth capital. (Source: Pitchbook).

The implications extend beyond venture capital. A robust secondary market reduces liquidity risk, lowers the cost of capital, and may ultimately support higher private-market allocations in institutional portfolios. In effect, secondaries transform venture capital from a blind-pool, long-duration bet into a more actively managed asset class.

Speculatively, we may be watching the emergence of what might think of as a true private-market yield curve, where duration, liquidity, and pricing can be actively traded rather than passively endured. If so, the “surprising third” isn’t just a new exit path. It’s a structural evolution in how capital compounds outside public markets.

On second thought, the real story isn’t that secondaries grew. It’s that venture capital may have finally built a liquidity mechanism sophisticated enough to match the scale of the ecosystem it created.

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