Global private equity secondary transaction volume hit a record $160 billion USD in 2025, according to Preqin estimates. That figure has roughly tripled over the past decade, and the market has maintained its momentum through 2026. The primary drivers of this supply are institutions similar to those managing capital in British Columbia.

BC-based university endowments and mid-size pension plans have spent three years navigating a familiar challenge: after becoming enthusiastic about private equity during the low-rate era, these illiquid positions now exceed their target portfolio weights. When public equity markets retreated while private equity valuations remained elevated—a phenomenon known as the "denominator effect"—these illiquid assets began to dominate institutional portfolios. The solution, increasingly, is the secondary market: selling limited partner (LP) stakes to specialist buyers.

Pricing has improved for sellers. Secondary market discounts to net asset value narrowed to roughly 8 to 10 per cent in the first half of 2026, according to Setter Capital's pricing index. This is a meaningful compression from the 15 to 18 per cent discounts seen in 2023. For sellers, the bid-ask spread has tightened, providing liquidity at more favourable terms. For buyers, the window for distressed pricing has narrowed but remains open. An 8 per cent discount on a mature, partially-realized portfolio offers a structurally attractive entry point into assets that have already cleared the early J-curve.

Canadian institutional investors represent an estimated 12 per cent of global secondary supply, a share that has grown as domestic pension plans rebalance toward liquidity. This is a disproportionate contribution for Canada, reflecting aggressive allocations to private equity during the 2015–2021 vintage years.

The BC context is distinct. University endowments—such as those managed by UBC's Investment Management Trust (IMANT) and the SFU endowment office—operate under dual mandates: generating returns to fund operations and maintaining liquidity for annual distributions. When private equity positions are marked at attractive net asset values but cannot be easily monetized, the liquidity mandate creates pressure. Selling on the secondary market is a form of portfolio engineering rather than a distress signal.

The mechanics of a secondary transaction are straightforward. An LP holds a stake in a private equity fund—for example, a 2018-vintage buyout fund. A secondary fund purchases that stake at a negotiated discount, inheriting the remaining portfolio and future distributions. The buyer's return is derived from the entry discount and the underlying portfolio's performance. Because the fund is mature, the buyer avoids the blind-pool risk associated with primary commitments, gaining visibility into the specific companies within the portfolio.

This de-risking is the structural argument for secondaries as an asset class. However, as more capital enters the space, the discounts that once made the trade highly lucrative have compressed. The 8 to 10 per cent discount range of early 2026 reflects strong market demand, contrasting with 2023, when rate uncertainty provided buyers with significantly more leverage.

For BC's mid-market investment community—including family offices and smaller institutional allocators—the secondary market has historically been difficult to access due to high minimum commitments at dedicated secondary funds. Yet, the surge in Canadian institutional supply is creating downstream opportunities. Some transactions are now structured as co-investments, allowing smaller, sophisticated investors to participate alongside lead secondary buyers on specific LP stakes. This represents an entry point few mid-market BC investors have fully integrated into their allocation frameworks.

Risks persist. Secondary buyers inherit the challenges of the underlying portfolio, including valuations that may not yet reflect deteriorating fundamentals. Net asset value is an appraisal, not a market price; in a higher-rate environment, some portfolio companies carry leverage that is less sustainable than it appeared in 2019. Due diligence on the underlying assets remains as critical as the headline discount.

Timing is also a factor. Secondary market conditions are cyclical. If interest rates decline and private equity distributions accelerate, the supply of motivated institutional sellers may diminish, further tightening discounts. The current window is a product of a specific macroeconomic environment: high rates, constrained distributions, and institutional rebalancing pressure.

The secondary market is no longer a niche corner of private equity. It is a $160-billion-USD global market with significant Canadian supply, improving liquidity, and a structural argument for de-risked access to mature portfolios. While the discount compression since 2023 requires greater selectivity, the opportunity remains for those prepared to act.

What to watch:

• Setter Capital's quarterly pricing index for shifts in the discount trend; a widening toward 12 per cent or more would signal renewed seller pressure.
• Annual disclosures from IMANT and the SFU endowment for changes in private equity allocation targets and secondary activity.
• Secondary fund fundraising cycles: if large dedicated funds are oversubscribed, they will be motivated to deploy capital, with BC institutional supply serving as a primary source of deal flow.
• The interest rate trajectory: further Bank of Canada cuts could ease stress on portfolio companies, potentially reducing the urgency of institutional secondary sales.