How Secondaries Investors Think About Liquidity and Exits

Why It Matters

The strategy gives limited partners sustained upside from public listings and acquisitions, reshaping liquidity expectations in the secondary market.

Key Takeaways

• Secondaries investors adopt buy‑and‑hold strategy through liquidity events.
• They often retain shares post‑IPO, distributing to limited partners later.
• No fixed exit timeline; exits occur via acquisition or strategic sale.
• Investors forecast company valuation and timing of liquidity events.
• Partners “eat their own cooking,” investing heavily in their own funds.

Summary

The video explains how secondary market investors evaluate liquidity and exit strategies when entering a company in its second year or acquiring a stake from another firm.

The speaker emphasizes a buy‑and‑hold approach, staying invested through IPOs or acquisitions, and only exiting when a liquidity event materializes. They forecast valuation growth and timing, but do not set a rigid three‑year horizon.

“We’re big believers in eating your own cooking,” the partner says, noting they are among the largest investors in their own fund and often retain public‑company stock to later distribute to limited partners.

This mindset aligns secondary investors with long‑term value creation, offering LPs exposure to post‑IPO upside while managing exit risk, and signals a shift from short‑term turnover to strategic holding periods.

Original Description

How does a secondaries investor think about liquidity when buying into a company that's already mid-cycle? Scott Neuberger, Co-Founder and Managing Partner at Karmel Capital, explains why they don't have a defined exit point, and what that means for how you underwrite deals.

Rather than targeting a fixed one, two or three-year timeline, the buy-and-hold approach means holding through whatever the natural liquidity event is, whether that's an acquisition or an IPO—and often beyond. Scott breaks down how that shapes deal selection, why you only invest in companies you believe will grow value significantly over the hold period and how post-IPO distribution to LPs can extend that runway further.

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