Direct or LP: Choose Your Fighter
As we noted in last month’s newsletter, the secondaries market has experienced a noticeable resurgence over the past quarter. Buyers now have more choice than at any point in recent years. This month we are taking a closer look at the two main routes to invest, Direct Secondaries and LP Secondaries, their advantages and disadvantages, and what we are seeing in the market today.
Direct Secondaries
In simple terms, this involves buying shares from early employees, seed investors, or other existing shareholders. Structures can range from straightforward transfers to more complex preferred equity arrangements, which we will discuss in detail in our forthcoming podcast series.
Pros
Precision – Ability to target specific high-conviction names.
Transparency – Clear view of business performance and market position.
Control – Opportunity to negotiate the entry point and structure directly.
Cons
Access-driven – Dependent on network or broker relationships.
Concentration risk – Exposure to a single name increases volatility.
Market view: Buyer pricing power is currently strong, particularly in late-stage companies facing extended IPO timelines. Well-connected buyers can often secure positions at 15 to 40 per cent discounts to the last round where sellers require liquidity.
LP Secondaries
This route involves acquiring limited partner interests in existing venture or growth funds. Historically a niche corner of private markets, particularly in venture capital, it has grown significantly as investors seek diversified exposure while reducing single-asset risk.
Pros
Diversification – Exposure to multiple companies in one transaction.
Efficiency – Faster route to broad exposure without building a portfolio from scratch.
Pricing – Potential for significant discounts when sellers are under pressure.
Cons
Blind pool – Limited control over the specific underlying holdings.
GP consent – Manager approval requirements can add complexity.
Market view: LP secondaries are often trading at 30 to 50 per cent discounts to NAV, which is deeper than in most direct transactions. For buyers who understand the portfolio, this can present significant value.
RyHab Capital’s View
At present, LP secondaries offer the widest pricing dislocation. However, for speed, simplicity, and the ability to target marquee names, direct secondaries remain highly attractive. The most effective strategies combine the two, using LP secondaries for discounted diversification and adding direct stakes in the highest-conviction companies.
If you would like to explore either route, or review examples from our current deal flow, we would be pleased to arrange a discussion.
August 2025