Secondary funds are specialized investment fundsfunds that specialize in trading existing shares in private equity-funds or venture capital-funds. Instead of investing directly in companies, these funds buy existing stakes from other investors. Secondary funds offer investors the opportunity to enter into a portfolio of established and diversified private equity or venture capital positions without having to make new investments. This type of fund gives investors access to a broader range of investment opportunities and increases liquidity in the alternative investment market.

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The following example provides a comparison between secondary funds and private equity funds:
A traditional private equity fund has a holding period of seven to ten years. This holding period can be shortened with the help of secondaries. The secondary market enables investors to sell their private equity fund positions early. The new owner (buyer) assumes all rights and obligations of the seller, including all outstanding obligations. Primary funds are therefore funds that invest in portfolio companies, while secondary funds invest in already active primary funds.