Secondaries volume hit a record $120 billion in the first half. Continuation vehicles have stopped being a workaround and become the exit market itself. The buy side is running short of capital to absorb them.
Global secondary market volume exceeded $120 billion in the first six months of 2026, a 20 percent increase on the previous record set in the first half of 2025, according to Evercore. Full year 2025 volume was $226 billion, itself a record.
The composition matters more than the headline. Transactions led by general partners accounted for close to 54 percent of volume, a reversal of the pattern that held for years when sales of limited partner interests dominated. Continuation vehicles now represent roughly 86 percent of general partner led activity by transaction volume.
Within that, single asset continuation vehicles accounted for $34 billion of deal value, more than half of all general partner led volume. Sponsors are not using these structures to dispose of difficult assets. They are using them to retain their best ones.
Why limited partners are selling
The mechanism driving all of this is a distribution drought.
MSCI data indicates distributions ran at roughly 6 percent of buyout assets under management in the year to June 2025, against a ten year average closer to 14 percent. Approximately 40 percent of buyout fund net asset value is now aged more than seven years, with a substantial exit backlog sitting behind it.
Limited partners are therefore facing a portfolio in which paper marks are healthy and cash is not. Distributions to paid in capital has displaced internal rate of return as the metric that determines re up decisions, which in turn means it determines which managers raise their next fund. The consequence is a fundraising market that has bifurcated sharply: managers with realised distributions close quickly, and managers without them struggle to reach a first close.
The secondary market is where that pressure is being released. Endowments, foundations, family offices and asset managers are each meaningful sellers, using secondaries not as a distress measure but as an active portfolio management tool to rotate capital into newer vintages and rebalance exposure.
What it costs to get out
Pricing has been supportive enough to keep transactions clearing. High quality buyout positions have generally traded in the high 80s to low 90s as a percentage of net asset value. In the first half of 2026, discounts on limited partner interests averaged roughly 5 percent to 15 percent for established buyout funds, widening to something closer to 10 percent to 25 percent for challenged segments such as office real estate and 2020 to 2021 vintage venture portfolios. Assets moving into continuation vehicles priced far closer to par.
Two cautions belong alongside those numbers. First, net asset value is backward looking. A quarterly mark can be three to six months stale, and in a softening market the reported figure overstates realisable value, which means a headline discount may be narrower in substance than it appears. Second, a buyer of a limited partner interest inherits the remaining management fee obligation, which is a real drag on the return profile that discount arithmetic alone does not capture.
The capacity problem
The constraint is now on the buy side.
Secondaries fundraising peaked in 2025 at $119.9 billion, a record. Elevated transaction volume in the first half of 2026 has consumed that capital quickly. Dry powder available to secondaries buyers declined 10 percent between the start of the year and the end of June, and the capital overhang multiple, which measures available capital against the trailing twelve months of transaction volume, now sits close to 1.0 times.
A multiple near 1.0 times means the market is holding approximately one year of purchasing power. That is thin. If deal supply continues at the current pace and fundraising does not keep step, the buy side gains pricing power, discounts widen and the release valve narrows precisely when limited partners need it most.
The software exception
One segment moved against the trend. Software as a share of general partner led volume fell by 8 percentage points, which Evercore attributes to concerns about the underlying value of businesses exposed to disruption from artificial intelligence, declining public comparables and inconsistent operating performance.
This is worth dwelling on. Software has been the single largest concentration in both sponsor portfolios and private credit loan books for the better part of a decade. The secondaries market is now pricing a discount into that exposure that neither the primary market nor the credit market has fully expressed. Secondary pricing is the closest thing private markets have to a live quote. When it diverges from reported marks, it is usually the quote that is right.
The governance question nobody has settled
The structural growth of continuation vehicles has outrun the governance framework around them.
A continuation vehicle asks the same general partner to act simultaneously as seller and buyer, setting a price on an asset it already owns and will continue to manage. Existing limited partners are given a choice between cashing out and rolling, frequently on a compressed timetable and without independent valuation of the alternative. Litigation in the Delaware Court of Chancery has already tested whether a sponsor improperly steered an asset toward a continuation fund, and the outcome of that line of cases will shape documentation practice across the market.
For allocators, this is not a theoretical concern. It is the reason process quality, not just pricing, belongs in the diligence file.
What it means for allocators
- Treat distributions to paid in capital as the governing metric, and verify whether it is gross or net. The difference on a mature buyout fund with standard carry can be 0.2 to 0.4 of multiple.
- Distinguish continuation vehicle distributions from genuine exits. Cash generated by a sponsor selling to a vehicle it manages is real cash, but it is not the same signal as a trade sale or a listing.
- Monitor the capital overhang multiple quarterly. A ratio near 1.0 times is the single best available indicator of where secondary pricing goes next.
- Use secondary pricing as an independent mark. Where secondary bids diverge materially from reported net asset value in a strategy you hold, treat the secondary bid as the more current information.
- Build a continuation vehicle governance checklist. Independent valuation, adequacy of the election period, status quo option quality, fee and carry treatment on rolled interests, and the identity of the party paying transaction costs.
- Stress test the software concentration across sleeves. Buyout exposure, private credit exposure and growth equity exposure may all be expressing the same underlying bet.
