Secondaries of Secondaries: When the Exit Needs an Exit
Tertiary funds are buying stakes in secondary funds. It is a sign that private equity's liquidity problem runs deeper than the industry wants to admit, and that stacking funds on top of funds is not a real fix.
The secondary market is supposed to be private equity's exit door. You buy into a fund, you wait, and if you need to get out before the ten-year clock runs down, you sell your stake to a secondary buyer.
Now investors are raising funds to buy stakes in the secondary funds. These are tertiary funds. Secondaries of secondaries. They exist because the secondary market got large enough that the people inside it need their own way out.
The original liquidity problem in private equity went unsolved. The industry packaged it.
The Numbers
Tertiary investing remains small. It is growing fast.
- Netley Capital, based in London, launched in September 2025 with $315 million in deployable capital. By April 2026, that number had more than doubled to $825 million. The firm focuses on tertiaries.
- Bex Capital, based in France, closed its fifth fund at $765 million in 2024. It hit the target in four months. Fund V writes checks of $5 million to $1 billion into fund-of-funds secondaries.
- Sturbridge Capital, based in Michigan, closed its third Diversified Private Equity Fund at $288 million in 2024. It buys LP interests in fund-of-funds, secondary funds, and tail-end funds.
These firms argue that any reason an LP would sell a stake in a primary fund applies to selling a stake in a secondary fund. Death, divorce, portfolio rebalancing, a new mandate, a bad quarter. The reasons do not care which layer of the cake you sit on.
The Fee Stack
Every layer charges its own management fee and its own carry. The original fund. The secondary fund that bought into it. The tertiary fund that bought into the secondary fund. Three layers of "two and twenty," sitting on top of the same underlying companies.
You hold a piece of the same SpaceX share, the same OpenAI position, the same growth-stage software company. You pay three teams to look at it.
The carry compounds. If the underlying assets do well, each layer takes a slice on the way up. The end investor in a tertiary fund eats the cost of every team between them and the company.
Fund-of-funds investors have been having this conversation for thirty years. The new wrinkle: the secondary market, sold for years as the answer to PE's liquidity problem, now generates its own fund-of-funds layer. The exit door has another room behind it.
What This Signals
Tertiary funds work for the people who buy and run them. The existence of a tertiary market signals something the industry has avoided saying.
Sponsors packaged around the liquidity problem instead of fixing it.
When secondaries first scaled up, the pitch was that LPs no longer had to wait ten years. They could sell. The market would clear. The asset class would feel liquid in the way public equities feel liquid.
That story is breaking down. Secondary funds are themselves illiquid investments. Their LPs sometimes need out. So a market for that exists, with its own fees and its own ten-year clock. If the next decade brings tertiary funds that need exits, expect quaternaries. Names will change. The math will not.
A Better Question
Stop counting layers. Ask why the original investment has to be illiquid.
Some of the illiquidity is real. Operational improvements take years. Exits depend on market windows. Fund structures were drafted in a different era.
Most of it is inherited habit. Funds get drafted with the same lock-up language. GP consent processes are designed to be slow. Transfer paperwork is treated as bespoke when it should be standard. Each of those is a choice.
When liquidity sits inside the original investment, you do not need three fund layers to find it later. You sell the position and move on.
How Legion Thinks About It
Legion's secondary market sits inside the platform. It runs as part of how every position works from day one, not as a bolted-on feature or a partner integration.
When an LP invests through Legion, they do not enter a black box that requires a fund-of-funds bailout to escape. They hold a position in an SPV with a known structure, standardized transfer documents, and a buyer pool of qualified investors who can transact in days.
The same applies for fund managers. When you tell prospective LPs that liquidity is part of the deal, you remove the biggest objection to writing a check. You do not wait for a tertiary fund to exist before your investors can sleep at night.
What Should Change
Tertiary funds will keep growing. The fees pay well and the use case is real. The people running them are not wrong to build them.
The industry should stop pretending that adding another layer solves the problem.
If your liquidity strategy depends on someone, somewhere, building a fund to buy your stake, you do not have a strategy. You have a hope.
The fix sits upstream. Build the original product so it does not need a rescue layer. Standardize the transfer process. Make GP consent fast and reliable. Give qualified investors a real market with real buyers and real prices. Treat liquidity as a baseline.
That is the version where private markets grow up.
Build real liquidity instead of stacking funds. See how Legion gives investors a real exit path, or learn how managers use it to raise faster.