The secondary market for private fund interests is expanding rapidly, driven by investor demand for greater liquidity and portfolio flexibility. As efficiency and transparency become priorities, auction-based platforms are emerging as the preferred model over traditional agent-led sales. These platforms enable better price realization and streamlined transactions—provided they offer end-to-end functionality, robust data security, and accurate market pricing. The continued growth of secondaries is expected to accelerate with the adoption of well-designed auction-based platforms.
In the previously published Insights whitepaper, we described the superiority of auctions over agent-based approaches for optimizing secondary LP investment sales. The whitepaper examined the advantages of auction-based sales processes over traditional agent-led transactions, and was supported by academic research, case studies, and real-world examples. It sought to convey an understanding as to why auctions are a superior method for optimizing secondary investment sales.
In this paper, we will describe the attributes of optimal platforms for conducting auction-based sales of secondary LPs. But first, we review the findings of our earlier paper. In it, we observed that there are several notable benefits to using an auction approach, summarized below.
Superior pricing
Auctions often lead to higher price realization by creating a competitive environment where multiple buyers vie for the same asset.
Faster execution
Auctions are generally more efficient than agent-facilitated sales. With a predefined timeline for bid submissions and reviews, auctions facilitate quicker decision-making and reduce the time assets spend on the market.
Transparency
The transparency of auctions allows sellers to gain valuable insights into market demand and pricing.
Market dynamics
Auctions leverage competitive market dynamics to the seller’s advantage. By encouraging multiple buyers to compete, auctions can result in higher bids and better terms.
Cost
Auctions offer lower fees to traditional agent-led sales.
While the superiority of an auction-based process has notable advantages, for this process to be successful it is essential to have a robust platform on which to conduct secondary investment sales. The characteristics of such a platform include:
Confidentiality & data security
Protect buyer and seller information throughout the process.
Market based pricing
To accurately provide the market value of fund positions through active bidding.
Global reach
For access to a significant number of opportunities by connecting buyers and sellers in Asia, America and Europe.
Efficiency
To reduce the time and complexity of traditional secondary transactions by streamlining workflows.
For LP sellers seeking to employ a digital platform – while retaining control of the sales process from the beginning to end – there are several characteristics that an optimal platform will provide, starting with a purpose-built intake form to quickly and securely guide sellers through everything needed to list fund positions on the marketplace.
Once listed, buyers can ideally discover new opportunities in real-time, directly on the marketplace platform. Each opportunity must include a secure data area with anonymized documents to allow buyers to assess opportunities, with access to the data ‘room’ conditioned to seller’s approval and the signature of an NDA.
Sellers on the platform can have confidence that their sales price reflects actual market value, as multiple bids submitted through the auction process provide sellers with a good proxy for a market consensus on price, which may be helpful in communicating internally about the sale, and justifying it.
Buyers should be able to provide non-binding and binding bids through a dedicated bidding tool for efficiency and clarity, and there must be an interface – or dashboard – where sellers can review and select bids easily from the buyers they wish to continue the process with.
Once a buyer is selected as having won the auction, the optimal platform will provide a tool for the interested parties to proceed with the closing of the transaction, typically consisting of four distinct steps:
1. Letter of Intent (LOI) signature.
2. Sale & Purchase Agreement (SPA) negotiations & signature transfer.
3. Transfer Agreement (TA) signature & funds in escrow.
4. Final payment & transfer of assets.
A platform with these characteristics can thus facilitate every step of the sales process, from notifying the GP of the intent to sell to the transfer of the asset, as shown in the graphic below (Exhibit 1).
The LP secondaries market has been growing rapidly and shows no signs of slowing down. In fact, it recorded its largest year on record in 2024, as shown below (Exhibit 2).
In this environment, it’s no surprise that LP investors seeking liquidity are pursuing more efficient, cost effective, and robust mechanisms for conducting transactions, and to be up to the task the platforms on which to accomplish this must be well designed for optimal outcomes.
The dramatic growth of secondaries transactions in recent years is likely to be further facilitated and expanded upon by the use of auction-based transactions, which offer benefits not available through agent-led transactions. For these auction-based transactions to be successful, it will be imperative they are conducted on well-conceived and fully developed platforms characterized by features including a comprehensive ‘start to finish’ framework, superior privacy and data protection, and the ability to accurately provide the market value of fund positions.
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