Last week in Budapest, at 0100 Emerging Europe, I had the pleasure to moderate “The New Liquidity Playbook,” a conversation on how secondaries are reshaping liquidity well beyond the US and Western Europe. Around the table were Petr Poldauf, Senior Investment Director, Private Equity Secondaries at Schroders Capital; Dominic Reed, Partner at EastPeak Invest; Emre Karabekirogullari, Director of Investments, Private Equity at Sarona Asset Management; and Péter Oszkó, Founder & CEO of O3 Partners.
We started with the global numbers, but the discussion kept pulling in one direction: what secondaries mean in markets where the exit problem is really a capital-recycling problem. That’s the thread this piece follows.
A different problem wearing the same name
The global secondaries market is on track for another record, with GP-led volume growing around 35% this year. In mature markets, the dominant driver is increasingly strategic: managers using continuation vehicles to hold onto their best assets rather than sell them to a competitor.
Emerging markets are catching the same wave, but for a different reason. Here, the constraint isn’t whether a GP wants to keep a trophy asset. It’s that the largest investors in the asset class, development finance institutions and state-backed programs, are running out of room to make new commitments.
“Primary capital done in Africa is 80% done by DFIs.”
When one type of investor supplies most of a market’s primary capital, its liquidity becomes the market’s liquidity. DFIs are now under pressure from their government shareholders to recycle money back, and many are building dedicated liquidity departments to do it. The logic is simple: no sales, no new fund commitments.
“And that’s the only way for them to get additional primary capital.”
That makes emerging-markets secondaries something closer to public infrastructure than a trading strategy. If DFIs can’t exit older positions, first-time and emerging managers lose their anchor investor, and the pipeline of new funds slows. The expectation from the discussion is that DFIs will sell LP positions in a much heavier way over the coming years, creating a product need that the market is only beginning to serve.
CEE: when a whole vintage has to close at once
Central and Eastern Europe shows what happens when a private market is built largely on public money. The region holds an estimated $20 billion of unrealized value on roughly $14 billion invested, and raises about $1.5 billion to $2 billion of primary capital a year. For every new dollar invested, only around 40 cents is coming back as liquidity.
“Gravity works exactly the same way in Warsaw as it does in London, New York.”
Hungary is the extreme case. Between 2010 and 2012, around 30 new funds with 30 new managers launched almost simultaneously, on public capital, with no prior market to learn from. A decade later, they all needed to close together. Because they were regulated public vehicles, they faced hard deadlines, had to account for gains and losses to close the book, and generally could not use continuation vehicles.
A forced, synchronized seller with few bidders is the textbook setup for deep discounts. Buyers who stepped in bought entire portfolios, held them for three to four years toward realistic exits, and did so without initially thinking of it as a secondaries business.
“We realized later that it’s secondary what we are doing.”
It also created a model that looks nothing like Western VC secondaries. Instead of buying 5%–10% from a founder or early investor, buyers took 30%–40% fully vested stakes or whole portfolios and ran them to exit, using earn-outs to share future upside with sellers who had accepted steep entry prices. As public money shifts toward co-investment structures, private secondary capital has become a precondition for the next vintage of CEE funds to raise at all.
The discount map: dispersion is the story
In mature markets, pricing discussions center on a few points of NAV. Across emerging markets, the spread is enormous, driven by GP quality, reporting standards, macro stress and the number of buyers at the table.
“The less sophisticated the market is, the more discounts we see.”
Two things stand out. First, Eastern Europe has quietly become the “developed” end of the emerging-markets spectrum: tight discounts, credible NAVs and enough liquidity that a buyer can also sell. That makes it attractive for risk-conscious secondaries buyers, even if it isn’t where the deep value is.
Second, competition matters as much as fundamentals. Where a single asset or portfolio in the West might draw 20 bidders, many emerging-markets deals have one or two. Sellers under regulatory or political pressure to close have little leverage, and structures, earn-outs, deferred and phased payments, do the work of bridging the gap between a seller’s NAV and a buyer’s mid-20s return target.
The real edge is knowing the GP
In mature markets, diligence starts with reporting. In frontier markets, reporting can’t carry the weight on its own. The approach that emerged from the discussion is blunt: pricing is only efficient when the buyer already understands how a GP values its portfolio.
“We just prioritize the GPs that we know well.”, said one of the speakers.
Without that familiarity, bids get priced so conservatively that deals rarely close. With it, even an African fund can be priced with confidence. That turns long-standing primary relationships into the main competitive advantage in emerging-markets secondaries, and explains why the most active buyers are often investors who have been LPs in these markets for 15 years, not newly launched dedicated funds.
It is also pushing some of those investors to reorganize. Holding periods for primaries and secondaries don’t match well, so at least one emerging-markets investor is now separating the two, running primaries through separately managed accounts and building dedicated secondaries buckets, currently around $20 million in size. The track record behind that goes back further than many expect: its first emerging-markets secondary was done in Africa in 2011.
When the buyer has to become the liquidator
The hardest part of emerging-markets secondaries isn’t buying. It’s what happens when the GP has no remaining alignment to run the portfolio. In that case, the buyer either rebuilds the incentives or takes a more active role in winding the fund down.
EXPLAINER: THE “SUPER LP”
An investor holding more than 75% of a fund’s LP interests can gain the right to amend the LPA. It is not a replacement of the GP, but it allows the investor to control the budget and appoint advisors to take the driver’s seat on exits. In distressed emerging-markets funds, it can be the difference between waiting indefinitely and actually realizing value.
“You have to be also sharpening your skills, strengthening your muscles on liquidating the companies.”
This is a genuinely different job from the mature-market secondaries model, where a buyer typically underwrites NAV and waits for the GP to exit. In frontier markets, particularly Africa, some funds may have no path to value other than an active liquidation.
Continuation vehicles, emerging-markets style
Continuation vehicles in these markets rarely look like the single-asset trophy deals dominating headlines in New York and London. One early example was a Brazilian deal around 2016–2017, triggered when a GP team split and the departing team needed backing to take its portfolio with it. Another, currently in progress in Africa, is a bridge vehicle for a company the GP has been trying to sell for more than three years.
The conflict debate shifts accordingly. In mature markets, critics ask whether the GP is buying from itself too cheaply. In emerging markets, the realistic alternative is often a fire sale, 50 cents on NAV versus 60 or 70 cents through a structured vehicle. The benchmark is the counterfactual, and trust depends on the buyer seeing the full sale history and every offer received.
“The continuation vehicle should provide a better option than a fire sale.”
Is it worth it?
The returns case for emerging-markets secondaries follows the global pattern, only more pronounced. Early distributions drive strong IRRs, secondary GP-led and LP-led deals in emerging markets were cited as delivering more than 30% IRR, but multiples can trail direct co-investments and the best primary funds. Buyers get their money back faster, with lower volatility and fewer home runs.
For DFIs and development-minded LPs, though, the returns question has a second dimension. Every position sold is capital that can be recommitted to a new fund. The value of a functioning secondaries market is measured not only in IRR, but in how many new vintages it makes possible.