They can put their investments in the fund as well as any remaining unfunded commitments on sale on the secondary market. A secondary investment involves the purchase of either the portfolio of the direct investment or the limited partner’s position in the fund and provides some liquidity for the original investors.
In the primary market, in contrast, a limited partner invests directly in the fund. Original investors might turn to the secondaries for various reasons: investment strategy changes, rebalancing the portfolio, inability to meet the subsequent takedown schedule, and so on. Thus, the main advantage that the secondary market offers is a shorter period of investment in the fund than that possible with the primaries.
While there is no public market for most private equity investments, a robust and maturing secondary market exists for sellers of private equity assets. Funds specialized in trading in the secondaries, called secondary funds, purchase existing investments.