Secondaries lack standardized benchmarks, sparking concerns about how institutional LPs measure performance. Traditional PE metrics, designed for public markets, may not suit illiquid private equity secondaries. The absence of clarity fuels investor skepticism about transparency and comparability across strategies. This gap risks misaligning expectations between funds and limited partners (LPs), as performance assessments remain inconsistent.

Benchmarking methods vary widely among LPs, with some avoiding secondaries-specific frameworks entirely. While public market benchmarks rely on liquid indices like the S&P 500, secondaries involve complex transactions—such as fund-of-funds sales or direct LP purchases—with opaque valuations. The source notes that few LPs have disclosed their evaluation criteria, leaving room for arbitrary comparisons. This inconsistency undermines trust in secondaries as a credible asset class.

Market-wide, the problem highlights a broader tension between innovation and standardization in private markets. Without uniform benchmarks, secondaries face scrutiny over valuation accuracy and long-term viability. Investors may hesitate to allocate capital until standardized metrics emerge. The source implies this stagnation could hinder secondaries’ growth, particularly as LPs demand clearer performance benchmarks to justify premium valuations. A concrete example: A major LP recently cited in discussions stated it uses internal models rather than industry-wide benchmarks, underscoring the ad hoc nature of current practices.

Investors and fund managers alike require consistent metrics to evaluate secondaries effectively. The absence of such standards risks fragmenting the market, complicating due diligence, and stifling institutional adoption. Until frameworks evolve, secondaries’ potential remains constrained by measurement uncertainty.