Private‑equity firms sit on about $4 trillion of un‑exited assets, driving a surge into the secondary market. Last year investors pledged a $166bn haul of commitments, a fresh high. Many funds now claim returns roughly 50% above the underlying buy‑out funds they acquire, leveraging discounted stakes and layered financing. Citigroup’s tightened private‑banker targets reflect the fee pressure behind this shift.

Those headline numbers conceal accounting quirks. Rules let funds immediately mark‑to‑original book value once a stake changes hands, inflating early IRR before assets are sold. Evergreen vehicles aimed at retail investors amplify the risk; shareholders may see 20‑25% gains then watch cash‑flows stall, a point Euan Finlay of Partners Capital warns could breed disappointment over time, in the long run.

Secondaries act as a pressure valve, buying stakes from cash‑strapped pension plans or aging funds and delivering liquidity. The same leverage that fuels outsized returns can magnify losses if a deal falters. Investors should therefore treat the sector’s impressive IRR figures as a volatility signal that can swiftly erode capital, especially when market conditions tighten and credit costs rise significantly.

The secondary boom coincides with high‑profile M&A, such as Blackstone and Tinicum’s £1.4 bn cash acquisition of aerospace parts maker Senior and Bill Ackman’s bid for Universal Music. Both underscore how liquidity‑hungry firms are turning to asset‑sale strategies to fund expansion in today's volatile market environment.