How buy-side dynamics are shifting in the white-hot secondary market

Author: Kevin Dowd
Read time: 6 minutes
Published date: June 2, 2026

As investment activity booms, the secondaries landscape is undergoing a generational shift. How can buy-side investors ensure they're keeping pace?

How secondary investment firms source opportunities

During this ongoing boom in the secondary space, it can seem like potential deals are popping up everywhere buy-side investors happen to look. In general, though, investors typically source secondary opportunities through a few specific avenues.

The first of these is to work with a broker, often an investment bank that has been tasked by the seller with measuring interest in the market and helping coordinate potential transactions. A broker will typically approach a buy-side secondary investor with a potential opportunity and then, if there’s interest, serve as an intermediary between the buy-side and the sell-side as the diligence and negotiation processes unfold.

Another common sourcing mechanism is the right of first refusal (ROFR), a common contractual clause in fund agreements. If an LP wants to divest an interest in a fund that has a ROFR in place, the fund GP is typically required to present the potential secondary opportunity to existing LPs first before taking the stake onto the broader secondary market.

A third method for sourcing secondaries is to be proactive. Investors may examine their own existing portfolios for assets to which they might want to increase their exposure and then reach out to GPs on their own about a potential deal.

Regardless of how a secondary opportunity is sourced, once it’s discovered by an investor, that opportunity must be analyzed and assessed. This underwriting process is when a buy-side firm’s data systems and analysis capabilities are truly put to the test.

The growing importance of data-driven diligence

Different investors might approach the underwriting process for secondary opportunities with varying levels of rigor. Savvy buy-side participants typically dig deep into the data, plumbing the depths of company-level data for each of the individual assets within a fund, examining key financial metrics such as revenue, profitability, and growth.

Usually, the most time-consuming aspect of underwriting and modeling potential secondary deals is gaining access to the granular portfolio company data trapped in documents and moving that data into a firm’s proprietary models. With AI-powered tools that efficiently and accurately extract data from fund documents, buy-side investors can spend more time analyzing and assessing opportunities and less time trying to wrangle PDFs and spreadsheets.

Key variables in underwriting secondaries

For buy-side secondary investors, the single most important variable in deciding whether to pursue a secondary opportunity is typically the price. Overall, secondary investors pore over fund-level performance metrics such as IRR, MOIC, and DPI. They examine company-level metrics such as revenue and growth rate, alongside the net asset value (NAV) for various assets.

However, qualitative factors also come into play, including the buy-side investors' established viewpoints on the GP managing the fund, the fund’s age, and how much capital has been called. Different pricing trends can prevail at various times in different sectors. If an investor is assessing opportunities across private equity, venture capital, and real estate, they may find differing prices in various asset classes.

"You factor all those things in," Seifert says. "And it’s not a binary thing—those variables all factor into what price we’re willing to pay."

The ultimate question: What’s the price?

As indicated, from a buy-side secondary investor's perspective, there’s no such thing as a potential deal that's either a definite yes or no. Any opportunity could be one to pounce on, as long as the price is right.

Generally, pricing in secondary deals occurs at a discount to NAV, while a smaller percentage occurs at a premium to NAV. Ultimately, what price a buy-side secondary investor should be willing to pay depends on the results of their diligence process and their confidence in the tools and analytics powering that process.

"Carta’s LP Portfolio Analytics platform is custom-built to transform this process from a time-consuming challenge into a concrete advantage."