By Dennis Scharf, managing director, secondary investments, Hamilton Lane
Executive summary
- The GP‑led secondary market is experiencing structural, post‑Covid growth as continuation vehicles gain traction across large‑cap and middle‑market sponsors, with single‑asset CVs proving resilient through varying market conditions.
- GPs increasingly use CVs to hold top‑performing assets longer, capturing economic upside and strengthening LP relationships, while middle‑market transactions offer especially attractive entry points due to conservative valuations and stronger historical returns.
- With relationship capital becoming a key differentiator, secondary platforms with deep GP partnerships and proven market expertise are best positioned to access high‑quality deal flow.
One of the secondary market’s main growth catalysts over the past decade has been the expansion of the GP-led continuation vehicle (CV) market. While the market has been around for over a decade, the real growth potential of the market only started to be realised post-Covid, as large-cap sponsors began pursuing both single-asset and multi-asset CV transactions, pulling stronger performing assets out of newer funds.
More recently, high-quality middle-market GPs began following the lead of large-cap sponsors and are now also fully embracing these transactions. As a result, the GP-led market has truly emerged as an increasingly diverse, high-growth opportunity set covering the full landscape of private market net asset value (NAV) and is helping drive the current undercapitalisation of the secondary market.
The CV market is well-positioned to exhibit strong growth in both strong and weak M&A markets alike.
Dennis Scharf, Hamilton Lane
Built to endure market cycles
While the entire GP-led market has exhibited a strong 26% compound annual volume growth rate since 2019, the most pronounced growth has been seen within the single-asset CV segment. With single-asset CVs increasingly being viewed as an alternative to traditional exits, some voices outside the trenches of the secondary market are suggesting that the growth of the GP-led market is a temporary phenomenon and primarily a function of a weak M&A market. These voices typically reference that, over the past four years, CVs have represented an increasing percentage of overall sponsor-backed exit volume and distributions.
CV market vs Global M&A volume and PE distributions ($bn)
While these percentages have certainly increased, the increase has been driven in large part by the significant decline in both M&A volumes and LP distributions since the market’s peak of 2021. Looking deeper, the growth trends in the GP-led market from 2022 to 2025 are not materially different from the longer-term growth trends experienced between 2019 and 2025. Further, 2H 2021 single-asset CV volume continued to represent an all-time record level until it was finally surpassed by 2H 2025 volumes. This suggests to us that the CV market is well-positioned to exhibit strong growth in both strong and weak M&A markets alike.
That’s not to say that weaker exit markets haven’t had a positive impact on the CV market. But, similar to what happened in mid-2020, M&A market uncertainty simply enhances pre-existing tailwinds and is the trigger that leads to even more GPs realising the economic and relationship benefits that CVs can offer. By holding trophy assets longer (between Q4 2022 and Q2 2025, the average realised multiples of cost for selling funds was 4.5x and 3.9x for multi-asset and single-asset CVs, respectively),1 GPs can realise significant economic benefits in the form of reinvested and future carry, capturing upside themselves in lieu of transferring this over to competing sponsors. And, similar to co-investing, high-quality GPs can use CVs to strengthen strategic long-term relationships with their core LPs, providing additional support and momentum for future primary fundraises.
Middle-market differentiators
As the GP-led market transitions to one dominated by relationship-oriented, high-quality GPs, experienced secondary firms viewed as strategic limited partner capital should continue to benefit from priority access to deal flow. More specifically though, secondary firms with middle-market relationships focusing on hard-to-access, non-syndicated CV transactions should be best positioned to capitalise on the GP-led market opportunity given: 1) the increasing importance that secondary fund LPs will likely place on differentiation going forward; and 2) the greater valuation arbitrage and return potential that exists across the small and middle market.
With the median single-asset CV deal pricing at 99.5% of NAV2 over the past three years, the potential for secondary valuation arbitrage at entry is directly tied to the conservatism in a GP’s NAV. Historically, small and middle-market GPs have proven to be materially more conservative than larger sponsors on valuations, as evidenced by the larger exit uplifts to NAV that they have captured through market cycles.
Median exit markups by fund size during the year prior to exit
Global buyout deal exited from Q1 2019 – Q2 2024
In terms of performance, our proprietary database of buyout co-investments since 2003 shows that the median realised gross IRR for small and middle-market buyout deals was 21.1% compared to the average median realised gross IRR of 16.6% for large-cap buyout deals.
Buyout spread of gross IRR by EV
Deal vintages 2003 – 2024, Realised deals only
Although it is still early days, research suggests similar outperformance might now be playing out across the CV market. CV deals with fund sizes of $500 million or below (those generally focused on small and middle-market companies) have so far returned a median net multiple of 1.6x, outperforming CVs with larger fund sizes that have returned 1.4x to date.3
Today, GP market growth is further solidifying the importance of relationship capital in the secondary market. We believe that only the platforms with both secondary‑market expertise and strong LP–GP relationships – especially in the middle market – may be able to fully capitalise on the supply/demand imbalances and access truly differentiated transactions. As we see it, partnering with platforms that possess these attributes can make the difference between hundreds of bps of outperformance potential and getting left behind.
Sources:
1. & 2. Hamilton Lane Proprietary Dataset
3. Morgan Stanley PCA – Continuation Fund Performance (October 2025)
Definitions:
Continuation Vehicles: A vehicle in which secondary buyers acquire one or more assets from an existing fund.
Corporate Finance/Buyout: Any PM fund that generally takes control position by buying a company.
Private Equity: A broad term used to describe any fund that offers equity capital to private companies.
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As of 2/24/2026