Secondary Markets Advanced

Fund Secondary

When a limited partner sells their interest in a VC fund to another buyer.

Definition

A fund secondary occurs when a limited partner (LP) sells their interest in a venture capital or private equity fund to another buyer. Unlike direct secondaries (where individual company shares are sold), fund secondaries involve selling the LP's share of an entire fund portfolio. The buyer inherits the LP's share of all the fund's investments, including any unrealized gains. Fund secondaries are a growing part of the secondary market.

Why it matters

Fund secondaries do not directly affect employees, but they reflect the broader liquidity environment. A healthy secondary market for fund interests means LPs have more flexibility, which can indirectly support continued VC investment in startups like yours.

Example

A university endowment invested $10M in a VC fund in 2018. In 2024, it sells its interest to a secondary fund for $18M, reflecting the fund's portfolio appreciation. The secondary buyer now receives future distributions from that VC fund.

Related terms

Limited Partner (LP)
An investor who provides capital to a VC fund but has no management role.
General Partner (GP)
The managing partner(s) of a VC fund who make investment decisions and manage the portfolio.
Secondary Market
A marketplace where private company shares are bought and sold between investors.
GP-Led Secondary
A transaction initiated by the fund manager to provide liquidity to LPs while retaining portfolio companies.
LP-Led Secondary
When a limited partner independently sells their fund interest to another buyer.
Fund of Funds
A fund that invests in other VC or PE funds rather than directly in companies.

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This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.