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Why now is an opportune time for secondaries

In the current market environment, several dynamics make this an attractive entry point for secondaries:

Market uncertainty and reduced exit activity

Market volatility may slow IPO and M&A activity, reducing primary fund distributions and potentially increasing demand for secondary liquidity solutions.

The denominator effect

Public market drawdowns can increase private equity allocations within portfolios, increasing investor rebalancing activity through secondary transactions.

Volatility creates entry opportunities

Short-term market volatility may create attractive entry opportunities, which may allow secondary managers to acquire diversified portfolios at more attractive prices.

A compelling opportunity in periods of market volatility

In today’s environment of elevated public market volatility, secondaries may offer a compelling opportunity. While no investment is immune to volatility, secondaries may offer a differentiated way to access private equity in uncertain markets.

Broad diversification1

Secondary funds can provide compelling diversification across sponsors, sectors, geographies, industries, and vintages, acting as a stable core holding.

Ability to acquire known assets

By purchasing interests in private investment funds when most or all of their capital has been invested, secondary managers can negotiate an attractive entry point with reduced blind pool risk.

Potential for earlier cash returns2

Unlike primary funds that require years of capital deployment, secondaries are already invested in mature companies, leading to shorter investment periods and the potential for faster, more consistent capital distributions.

Opportunity for downside mitigation

Assets acquired at a discount provide a degree of downside mitigation if underlying portfolio company valuations decline.

Historically lower dispersion than primary private equity

Historically, secondaries have demonstrated narrower return dispersion than primary private equity, reflecting the potential for more consistent outcomes across market cycles.
 

Return Dispersion Across Private Equity, Secondaries and Global Active Equities3

From January 1, 2005—December 31, 2025

Demonstrated resilience in market downturns

During periods of public market stress, secondaries have historically shown less volatility.

Lower correlation to public markets

Private equity secondaries have historically shown lower correlation to public markets, offering the potential for meaningful diversification benefits and reduced sensitivity to public market volatility.

Secondaries has Generally Provided Greater Diversification to Stocks and Bonds5
10 years ending December 31, 2025
 

  US Stock Correlation US Bond Correlation
Private Equity 0.73 -0.06
Secondaries 0.52 -0.04

Franklin Templeton Private Markets

$283B

Private Markets AUM

44

Years of experience

500+

Global private markets investment professionals 

Note: Past performance is not an indicator or a guarantee of future results. Views expressed are those of Franklin Templeton and are subject to change. There can be no assurance that historical trends will continue. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Important data provider notices and terms available at www.franklintempletondatasources.com.

All investments contain risk and possible loss of principal.

Secondaries & Private Markets (including investments in private companies and/or securities) are complex and speculative, entail significant risk, should not be considered a complete investment program, and are suitable only for persons who can afford to lose their entire investment.
 

  1. Diversification does not assure profit or protect against market loss.
  2. Distributions are not guaranteed; there is no assurance that private equity secondary vehicles will be able to pay distributions at a specific rate, or at all.
  3. Source: MSCI Private Capital Solutions, Morningstar as of September 30, 2025. The returns for Global Active Equity Funds reflect the annualized returns for the period January 1, 2005 to September 30, 2025. The returns for secondaries and private equity are the internal rate of return (IRR) of the funds with vintage years from 2005 to 2018, as of September 30, 2025, for funds across all regions.
  4. Source: MSCI Private Capital Solutions, SPDJI, Bloomberg. Analysis by Franklin Templeton. Indexes used: Private Equity: MSCI Private Capital Solutions’ fund search results for US private equity funds (all categories); secondaries all strategies: MSCI Private Capital Solutions search results for global secondaries across all the strategies.
  5. Source: MSCI Private Capital Solutions, SPDJI, Bloomberg. Analysis by Franklin Templeton. Indexes used: secondaries all strategies: MSCI Private Capital Solutions search results for global secondaries across all strategies, US stocks; S&P 500 Total Return Index, US bonds; Bloomberg US aggregate index (Total Return), private equity: MSCI Private Capital Solutions’ fund search results for US private equity funds (all categories).

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Investment strategies involving Private Markets (such as Private Credit, Private Equity and Real Estate) are complex and speculative, entail significant risk and should not be considered a complete investment program. Such investments should be viewed as illiquid and may require a long-term commitment with no certainty of return. Depending on the product invested in, such investments and strategies may provide for only limited liquidity and are suitable only for persons who can afford to lose the entire amount of their investment. Private investments present certain challenges and involve incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor's ability to dispose of them at a favorable time or price.

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