Why Private Equity Secondaries Trade at a Discount to NAV (And When That Discount Disappears)

Private equity secondaries priced at an average of 87% of NAV (net asset value, the fund's reported value of its holdings) through 2025 and into the first half of 2026. That single number hides a wide split: buyout funds trade near 92%, venture funds near 78%, and trophy single-asset continuation vehicles now often price at or above 100%. The discount is not a flat tax on the asset class. It is a price for specific risks, and those risks can be underwritten away.

A secondary is simply the resale of an existing private equity stake before the fund's normal life ends. Instead of waiting eight to twelve years for a general partner (GP, the firm that manages the fund) to sell every company and return cash, an investor sells their position early to a buyer who specializes in exactly this. The market for these trades hit $220-240 billion in global volume in 2025, a record and a jump of roughly 42-48% year over year, according to the Jefferies 2025 Global Secondary Market Review. Dedicated secondary buyers were sitting on a record $327 billion of dry powder (committed but unspent capital) at year-end 2025, according to the same report, which tells you how much institutional money now specializes in doing nothing but this trade.

For accredited investors weighing an allocation to secondaries funds or direct positions, the discount to NAV is the entire investment thesis. Understanding why it exists, and which conditions make it shrink, is the difference between buying a bargain and buying someone else's problem.

What Buyers Are Actually Purchasing

There are two structurally different trades inside "secondaries," and they price differently for different reasons.

An LP-led secondary is the classic version: a limited partner (LP, an investor in the fund who is not managing it) sells their existing stake in one or more funds to a buyer. The buyer inherits a diversified slice of whatever the fund already owns, at whatever stage those companies are in. Pension funds, endowments, and insurance companies are the most common sellers, usually rebalancing a portfolio or freeing up cash rather than fleeing a bad bet.

A GP-led secondary, most commonly structured as a continuation vehicle (CV), works differently. The fund's own manager initiates the deal, moving one or several portfolio companies out of an aging fund and into a brand-new vehicle. Existing LPs get a choice: cash out at the negotiated price, or roll their stake into the new vehicle alongside fresh capital from secondary buyers. The GP typically stays on to keep running the asset, often because they believe it has more room to grow than the fund's remaining life allows. The Institutional Limited Partners Association has published detailed guidance on how these deals should be governed, given the obvious conflict of a GP negotiating a price for an asset it also wants to keep managing (see ILPA's continuation fund principles).

Both trades get priced relative to NAV, the fund's own reported valuation of its holdings, marked quarterly by the GP. That reference point is also where the trouble starts.

Why Buyers Pay Less Than the Sticker Price

Three forces push secondary pricing below NAV, and none of them are about the underlying companies being bad businesses.

Illiquidity. A private equity stake cannot be sold on an exchange in seconds. Finding a buyer, negotiating a price, and closing a transfer takes months. Buyers demand compensation for locking up capital in something they cannot exit on their own schedule, the same reason a bond that cannot be resold yields more than one that can.

Stale marks. NAV is an opinion, updated once a quarter, prepared by the same manager who benefits from a higher number. By the time a buyer is evaluating a stake, the marks they are looking at could be three to six months old, and private company valuations move faster than that, especially in venture and growth equity where a single funding round can reset a mark by 30% or more. Buyers discount to protect against marks that have not caught up to reality.

Blind-pool and J-curve risk. A blind pool is capital committed to a fund before the specific investments are known. Early in a private equity fund's life, fees and initial losses on early investments outweigh distributions, producing a "J-curve": a dip in reported returns before they climb. A secondary buyer stepping into a young fund is still exposed to whatever the blind pool has left to deploy and whatever losses have not yet surfaced. Stepping into an older fund removes blind-pool risk almost entirely, since most or all capital is already invested in known companies, which is exactly why age changes the price so much.

The Discount Is Not One Number

The average masks enormous variation by strategy and by fund age. The table below reflects 2025 full-year pricing from the Jefferies 2025 Global Secondary Market Review.

Strategy / Fund Age	Average Price as % of NAV (2025)	Implied Discount
Buyout funds	92%	8%
Credit funds	91%	9%
Venture / growth equity	78%	22%
Real estate	70%	30%
Funds under 5 years old	95%	5%
Tail-end funds, 10+ years old	73%	27%
All strategies blended (2025 average)	87%	13%

Buyout is priced closest to par because its underlying companies tend to be cash-generative, mature, and easier to underwrite from the outside. Venture and real estate trade at steeper discounts because their valuations are harder to verify and their exit timelines are less predictable. The blended average of 87% held flat through the first half of 2026 according to the Campbell Lutyens 1H 2026 Secondary Market Flash Report, down slightly from 89% in 2024, but that headline number is far less useful to an investor than knowing which strategy and which vintage they are actually buying.

Fund age matters as much as strategy. A fund under five years old is still deploying capital and still carries blind-pool risk, yet it prices at 95% of NAV because buyers trust that a young fund's marks reflect recent, defensible valuations. A tail-end fund over a decade old, holding a handful of leftover companies the GP has struggled to sell, prices at 73%, a 27% discount, because buyers assume the remaining assets are the ones nobody wanted to sell at a good price yet.

Where the Discount Shrinks, and Where It Flips to a Premium

The most important shift in the market over the past two years has happened inside GP-led continuation vehicles, and it illustrates exactly how a discount disappears when the underlying risk does.

Single-asset continuation vehicles, where a GP moves one specific, high-conviction company into a new fund, priced at an average discount of just 2.9% to NAV in the first half of 2026, per the Campbell Lutyens 1H 2026 Secondary Market Flash Report. Sixty-nine percent of these deals priced at par or above. Compare that to multi-asset continuation vehicles, bundling several companies together, where the discount widened to 10.5% over the same period. The gap exists because a single trophy asset can be diligenced deeply: buyers can call the CEO, check the growth numbers, and underwrite one specific company's future rather than guessing at a blended average of several. A GP willing to put its own reputation behind one asset, and roll its own carry into the new vehicle, is signaling conviction that buyers are willing to pay up for.

This same logic explains the other conditions where a discount compresses toward or through par:

• Recent, high-quality vintages. Funds raised in the last five years by managers with a clean track record price close to full NAV because there is less time for marks to drift from reality and less blind-pool capital still at risk.
• Non-distressed sellers. A pension fund selling to rebalance a portfolio, not to raise emergency cash, can afford to hold out for a better price, and buyers know it. Forced or urgent sellers get worse pricing because the market senses they will accept a lower bid rather than walk away.
• Brand-name GPs with proven exit records. A manager who has consistently sold companies at or above their marked value earns a pricing premium on future deals because buyers trust the marks are not inflated.
• Large, competitively auctioned portfolios. Scale attracts more bidders, and more bidders compress the discount, plain and simple.

A Real Deal: The NYC Retirement Systems Sale

The scale-and-competition dynamic played out in a transaction that became one of the largest LP-led sales of 2025. Blackstone's Strategic Partners unit acquired a roughly $5 billion portfolio of private equity fund interests from the New York City Retirement Systems, a deal covering roughly 450 individual LP interests spread across 125 funds managed by 75 different general partners, first reported in trade press in May 2025. The sale drew more than 80 bidders in its auction process, a level of competition the Jefferies 2025 review flagged as a defining feature of last year's record volume.

That level of competition is the mechanism, not a footnote. A diversified, well-documented $5 billion portfolio from a large public pension is exactly the profile that gets a tight price: known seller, known reason for selling (portfolio management, not distress), audited holdings, and enough bidders competing that nobody can lowball the process. Contrast that with a single LP quietly trying to sell a $2 million stake in a struggling tail-end fund with one interested buyer. The same underlying asset class, priced very differently, because the conditions around the sale are different, not because the companies inside the funds changed.

What Could Go Wrong

The discount exists because the risks are real, and they do not vanish just because pricing has tightened. Marks can still be wrong in either direction: a GP under pressure to raise a new fund has an incentive to keep marks elevated, and a buyer who pays 92% of an inflated NAV has not actually bought at an 8% discount to true value. Continuation vehicles concentrate conflict of interest by design. The GP is on both sides of the negotiation, deciding what price is fair for an asset it also wants to keep managing and earning fees on, which is precisely why ILPA's guidance pushes for independent fairness opinions and active LP advisory committee (LPAC, a committee of LPs that reviews conflicts and approves certain fund decisions on behalf of all investors) involvement in every CV transaction. An LPAC that rubber-stamps a GP's preferred price defeats the purpose of having one.

Liquidity in secondaries is also not liquidity in the way a public stock is liquid. Even a "tight" discount still means a multi-month sale process, transfer restrictions, and a buyer who can walk away during diligence. And record dry powder of $327 billion sitting in dedicated secondary funds means more competition for the best deals, which could compress pricing further in ways that reward existing holders of secondaries funds but make it harder for new capital entering the space to find the same bargains that existed a few years ago. Past pricing trends are not a guarantee of where the market goes next.

Frequently Asked Questions

What does NAV mean in a private equity secondary?

NAV, or net asset value, is the fund manager's own reported value of everything the fund currently owns, updated on a quarterly basis and used as the reference point against which secondary buyers negotiate a purchase price.

Is a GP-led continuation vehicle riskier than an LP-led secondary?

It carries a different risk, not necessarily a larger one: the GP is negotiating price on both sides of the deal, so the safeguard is independent fairness opinions and active LP advisory committee review rather than avoiding continuation vehicles altogether.

Why do venture secondaries trade at a bigger discount than buyout secondaries?

Venture-backed companies are harder to value between funding rounds, hold less predictable exit timelines, and carry more binary outcomes, all of which push buyers to demand a steeper discount, averaging 78% of NAV in 2025 versus 92% for buyout.

Can a secondary ever trade above NAV?

Yes: single-asset continuation vehicles built around one high-conviction company priced at or above NAV in 69% of first-half 2026 deals, according to Campbell Lutyens, when buyers had enough visibility into that specific asset to pay a premium for access.

Related Coverage on AIN

• The PE Secondaries Market Just Hit $240 Billion: What the Data Actually Shows
• How to Vet a GP-Led Continuation Fund Before You Commit Capital
• The Secondaries Market in Charts: $226 Billion and Counting

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.