Hedge funds accelerate private market secondaries amid surging deal flow and structural shifts

A quiet reconfiguration of the alternatives market is gathering momentum as macro and structural pressures make stakes in private funds both tradable and tempting for opportunistic investors. Hedge funds, long adept at hunting mismatches in public markets, are increasingly stepping into the private secondary market to buy fund interests at marked-down prices from owners seeking faster liquidity.

At the forefront of this shift is Boaz Weinstein, founder and chief investment officer of Saba Capital Management, who has begun making offers to acquire positions from shareholders in vehicles run by managers including Blue Owl and Starwood. According to the lead report, those proposals give sellers immediate cash while passing the long-term exposure to buyers prepared to wait for asset realisation. Weinstein, whose firm manages around $6 billion and built its reputation on credit relative value and capital structure trades, describes the approach as “buying pessimism.”

The expansion of this activity follows a broader surge in secondary transactions. Industry data show secondary deal volume climbed strongly in recent periods; MarketsGroup estimates transactions topped about $102.23 billion in the first half of 2025, a rise of roughly 51% year-on-year, with fund secondaries and direct secondaries both contributing to the gain. That buoyant deal flow has coincided with a jump in fundraising for secondaries strategies, SP Global reports global commitments to private equity secondaries totalled $92.9 billion in 2025, the largest annual tally since at least 2020, with mega-raises from managers such as Ardian, Blackstone and Thoma Bravo.

Several forces are combining to create the opening. The private markets have expanded into the trillions, increasing the pool of potential sellers. Many investors who once accepted decade-long lock-ups are now accessing alternatives through wealth channels or semi-liquid products that promise some withdrawal flexibility, yet the underlying assets, private companies, real estate and closely held credit, do not always permit rapid sale. When redemptions outpace realisation, funds may impose gates or slow withdrawals, prompting some investors to accept discounted sales of their fund interests.

Valuation dynamics amplify the opportunity. During episodes of market stress private valuations can lag, generating apparent mispricings that buyers with patient capital and rigorous analysis can exploit. Hedge funds argue they bring precisely those capabilities: deep trading desks, portfolio analytics and the flexibility to deploy capital quickly. That mix allows them to underwrite complex portfolios of private assets and pursue arbitrage-style returns when prices diverge from their view of intrinsic value.

The market’s evolving liquidity architecture is also widening the menu of exit options. The ecosystem now comprises established specialist secondaries houses, continuation fund sponsors, structured liquidity solutions and an increasing number of hedge funds making bespoke offers. According to SP Global, the fundraising boom for secondaries in 2025 was driven in part by institutional demand for these liquidity capabilities; Ardian closed on a record-sized secondary vehicle during the year, underscoring the scale of investor interest.

This change matters for how private markets function. Greater secondary activity could inject more frequent price discovery into an asset class that has historically lacked transparent trading, potentially improving allocation flexibility for investors who have been deterred by illiquidity. At the same time, heightened trading could expose valuation dispersion and compel managers toward clearer reporting or new liquidity provisions.

Not everyone welcomes the trend without reservation. Traditional secondary firms and some fund managers caution that rushed sales at steep discounts can crystallise losses for sellers and create hair-trigger markets that complicate long-term asset management. Managers may also adjust fund terms or liquidity offerings in response, altering the economics for both primary investors and secondary purchasers.

For investors with capital to commit and patience to wait, the emergence of hedge funds as active players in secondaries represents a compelling, if specialised, trade: buying stakes at a margin of safety and relying on eventual recovery or orderly realisation. Whether that will become a permanent feature of the alternatives landscape or a cyclical reaction to recent liquidity stress will depend on how fundraising, deal flow and manager responses evolve in the coming quarters. Industry data and recent fundraising activity suggest the market is already shifting in a way that will be consequential for the structure of private investing.