LP-Led Secondaries and the NAV Discount: Why Fund Stakes Trade Below Reported Value

LPs selling private equity fund stakes in 2025 got 87% of reported NAV on average, and buyout stakes fetched 92% while venture stakes fetched just 78%, according to the Jefferies 2025 Global Secondary Market Review. That gap between what a fund says it's worth and what someone will actually pay for it is the entire story of the LP-led secondary market. I want to walk you through why that gap exists, what widens it or narrows it, and how you can sit on the buying side of it.

Start with the basic term. NAV stands for net asset value. It's the value a fund's general partner assigns to its portfolio companies each quarter, based on marks that are part appraisal and part judgment call. When a limited partner, an LP, decides to sell its stake in that fund before the fund winds down, it doesn't sell at NAV. It sells at whatever a buyer will pay, and buyers almost never pay full price. In 2025 they paid 87 cents on the dollar on average, across a market that moved $240 billion in volume, up 48% year over year, per Jefferies. That's not a niche corner of private equity anymore. That's a real market with real pricing signals, and the pricing signal right now says reported NAV and cash-in-hand value are not the same thing.

How the LP Secondary Market Actually Works

Here's the mechanic. You commit capital to a private equity fund with, say, a 10-year life. Five years in, you need liquidity. A pension needs to rebalance. An endowment needs cash for spending. A family office wants out of a manager it's lost confidence in. You can't ask the fund to give your money back early. Private funds are illiquid by design; there's no redemption button. So you sell your limited partnership interest to another investor. That's an LP-led secondary. The underlying fund and its portfolio companies don't change. Only the name on the LP register changes.

This is a different animal from a GP-led secondary, where the general partner, not an LP, initiates the transaction, often by rolling a prized asset into a new continuation fund and giving existing investors the choice to cash out or reinvest. I've covered that structure and its conflicts of interest in our guide to GP-led secondaries and continuation funds. LP-led deals are simpler in one sense: the seller is the party with the liquidity need, not the manager engineering a fee reset. But simpler doesn't mean the pricing is generous. It means the pricing is honest about what illiquidity costs.

The buy side of this market is dominated by a small number of firms that have raised dedicated pools of capital just to buy LP stakes. Ardian runs one of the largest secondary platforms in the world. Lexington Partners, HarbourVest, and Coller Capital round out the group of firms that have been doing this longest and at the biggest scale. These firms employ teams whose job is to underwrite portfolios they didn't build, in funds they don't control, based on information the seller and the GP choose to share. That's a harder underwriting job than buying a single company. The discount you see in pricing data is partly the fee these buyers charge for taking it on.

What Actually Determines the Size of the Discount

The headline 87% NAV figure hides a lot of variation. Campbell Lutyens puts the 2025 average LP-led discount at 13.6% of NAV, essentially flat with 2024's 13.3%, but that average blends deals priced near par with deals priced at 60 cents on the dollar. According to Campbell Lutyens' FY2025 Secondary Market Overview, smaller and middle-market deals cleared at the widest discounts, largely because buyers simply know those GPs less well. Four forces set where any single deal lands.

The denominator effect. When public markets fall, an LP's private equity allocation, the numerator, stays roughly flat because private marks lag. The LP's total portfolio value, the denominator, drops. Suddenly private equity is overweight versus target allocation, and institutions sell fund stakes to rebalance, not because the fund performed badly. Forced or semi-forced sellers accept lower prices because they need to sell now, not because the assets are worth less.

The distribution drought. Northleaf Capital's research on the case for secondaries in 2026 describes four straight years of distributions running well below the historical average of roughly 20% of NAV per year. When funds aren't returning cash on schedule, LPs that need liquidity have one option left: sell in the secondary market. That's a structural driver behind the record $120 billion of LP-led volume in 2025, up 34% over the prior record. Northleaf notes that 40% of 2025's sellers were first-time secondaries participants. This isn't just seasoned institutions trading positions anymore. It's a broader base of LPs discovering they need an exit ramp that didn't used to exist for them.

Blind-pool and information risk. A buyer purchasing an LP stake is buying exposure to companies it may never meet, values it can't independently verify, and a GP relationship it inherits without having chosen it. The Commonfund research on LP-led pricing factors flags exactly this: buyer familiarity with the GP and the underlying assets moves pricing as much as the numbers on a spreadsheet do. The buyer prices in a discount for not knowing what it doesn't know.

Fund age and vintage. Jefferies found funds under five years old priced around 95% of NAV in 2025, while funds over ten years old, the "tail end" of a fund's life, still holding a few unsold companies past their intended exit window, priced at just 73% of NAV. A young fund still has its best assets ahead of it and a GP with incentive to perform. An old fund is often holding what's left after the good companies already sold. Those are the ones that were hard to exit, and a buyer has to assume that's for a bad reason until proven otherwise.

Strategy matters just as much as age. Here's how 2025 pricing broke down by strategy, per Jefferies:

Strategy	Average Price (% of NAV)	Implied Discount
Buyout	92%	8%
Credit	91%	9%
Venture / Growth	78%	22%
Real Estate	70%	30%

Buyout funds hold companies with revenue, cash flow, and comparable public market multiples a buyer can check against the GP's marks. That's why buyout prices closest to NAV. Venture funds hold companies with no cash flow and marks based on the last funding round, a number that can be stale by two years in a slow IPO market. Real estate takes the biggest haircut of the group, at 30%, reflecting how hard it's been to trust commercial property valuations while higher rates reset cap rates across the sector. The pattern is consistent. The harder it is to independently verify a mark, the bigger the discount a buyer demands to take the other side of it.

The Risk on Both Sides of the Trade

For sellers, the risk is straightforward and I won't soften it. You are locking in a loss versus reported value to get cash today. If your fund is marked at $10 million and you sell at 78% of NAV because it's a venture fund, you just took a $2.2 million haircut relative to the number your quarterly statement showed. If the fund's NAV mark turns out to be conservative and the companies later sell for more, you gave up upside you'll never see. Sellers with genuine liquidity needs, a redemption to meet or a rebalancing mandate to hit, often accept this trade because cash now beats a maybe-higher number in three years. Sellers without a real need to sell should ask themselves whether they're paying a steep price for patience they don't actually lack.

For buyers, the risk runs the other direction. You're relying on a GP's reported NAV as your starting point, and NAV is an estimate, not a market price. If the GP has been marking assets generously, a well-documented tendency in parts of private equity during slow-exit stretches, the discount you thought you were getting could shrink or disappear once real cash flows arrive. You're also buying a blind pool in the sense that you can't renegotiate terms with the underlying portfolio companies; you inherit whatever the fund already agreed to. And you're taking on liquidity risk yourself. Even a discounted secondary stake is still an illiquid private fund interest. You're not buying a bond you can sell tomorrow. You're buying patience at a discount, and patience only pays off if the underlying companies eventually generate the cash the marks assume they will.

How Accredited Investors Access the Buy Side

For years, this market belonged almost entirely to pensions, sovereign wealth funds, and endowments writing checks big enough to get Ardian or Lexington Partners on the phone. That's changed. A growing set of evergreen, tender-offer structured funds, registered under the Investment Company Act of 1940 and known in the industry as "'40 Act funds," now let accredited investors buy into diversified secondary portfolios with meaningfully lower minimums than a direct institutional commitment. Coller Capital and Ardian both sponsor vehicles built on this model, giving individual accredited investors and smaller family offices exposure to the same discount-to-NAV dynamic that institutional secondary buyers have captured for decades.

These evergreen structures work differently from a traditional closed-end fund. Instead of committing capital that gets called over several years and returned only at the fund's end, you buy in continuously and can request liquidity periodically through a tender offer, meaning the fund buys back a portion of investor shares at set intervals, subject to caps and with no guarantee every request gets filled. That periodic liquidity feature is the appeal. It's also the thing to read the fine print on, because tender offers can be oversubscribed and gated in stressed markets, which is exactly when you'd most want your money back.

I'd point you to our companion piece on continuation funds and LP liquidity in private equity for how these structures compare on the GP-led side. On the LP-led buying side, the diligence questions are different. What discount is the fund actually capturing across its portfolio, and does it disclose that figure? How diversified is it by vintage, strategy, and GP relationship, since a fund concentrated in tail-end venture stakes carries very different risk than one weighted toward young buyout funds? What are the actual tender-offer terms, historically, not just on paper? And what fees sit on top of a strategy whose entire value proposition is buying assets cheap? A secondary fund charging a full 1.5%-and-20% fee load on top of a 13.6% average sourcing discount needs to be sourcing meaningfully better than average to clear that bar for you.

None of this is a recommendation to buy any specific fund. It's a map of the terrain you'd be evaluating. The math that makes LP secondaries attractive, buying cash flows at 87 cents on the dollar instead of 100, only works if the discount survives contact with reality: real distributions, real exits, real cash. I think the structural case is sound. Distributions have been slow for four years, sellers keep showing up in record numbers, and buyers with patient capital keep getting paid to wait for it. But a sound structural case and a guaranteed return are two different sentences. Don't let one get mistaken for the other before you wire money into anything illiquid.

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.