Doing smaller secondary deals to shape the future of private equity

^{Michael Bego, Managing Partner, Kline Hill Partners}

Michael Bego is Managing Partner of Kline Hill Partners, based in Greenwich, Connecticut. The $7.5bn AUM firm focuses on LP, GP-led, and tech private equity secondaries. It’s transferred about 5,400 fund interests and direct company positions, and closed more than 860 deals, since Michael founded it in 2015.

Before Kline Hill, he worked in secondary investing as a partner at Willowridge Partners, and in consulting, sales, and operations at Numetrix (now part of Oracle), Linux Global Partners, Vincent Longo, and McKinsey.

Shaun Beaney, Editor of Preqin First Close, spoke with Michael about the growth of secondaries in private capital, the value of smaller deals, and expanding in Europe.

We often hear the phrase ‘liquidity solutions’ in private markets. What does that mean and why does it matter?

You can invest in a public stock, buy IBM stock, on one day, change your mind the next, press the button, and it’s sold. You can easily buy a car and sell it the next day. Buying and selling a house isn’t as easy, but you can do it. But when it comes to a private equity fund, to a buyout or venture fund, you might make a commitment for potentially 10, 15, even 20 years. You’re locked in. Funds that invest in private companies are not liquidly traded, and there’s not just one company, there’s usually 10, 20, sometimes 30 companies in one of these funds.

Private equity secondaries offer a solution. There are two main types. The most common, which applies to most investors, is LP secondaries. You can take your investment in one fund, your limited partnership investment, and go to a secondary fund, like Kline Hill Partners. We will look at that investment. We will study the companies. We will value them, and we’ll come up with a price. Then we’ll cut a check and wire money to the holder of these fund interests, they’re sold, and they’re out. Liquidity solutions are very important because otherwise investors can be sitting on a lot of capital for up to 15 years.

The second approach we call continuation funds, or GP-led deals, involving the general partner of a private equity fund. A secondary manager like us will work with a private equity or venture fund to take a stake in a single company or stakes in a few companies. The continuation vehicle will buy that company or multiple companies from a fund. The investors in that fund will have the option to either take the cash from us for a realization or, if they think the company has a great future and they’re more patient, to stay with the investment. The GP actively engages to create the liquidity.

How much of the current activity in private equity secondaries is down to short-term pressure on LPs and GPs. How much is part of the long-term expansion of the secondary market?

When I got involved in secondaries back in 2005, the annual volume was around $5bn. Now we’re talking about $220bn or more annually, which is a huge amount of growth. However, this volume is not more than 2% annual turnover of private equity assets. In the US, the public stock market turns over 100% every year – so it’s fully bought and sold every single year. From the secondary private equity perspective, it would take 50 years to get that same amount of liquidity.

But this market is growing. Half of the LPs selling portfolios are doing it for the first time. We see secondaries as a huge growth avenue because it’s only 2% penetration today, and each year half the sellers are first-time. We definitely expect them to repeat.

Zooming in on Kline Hill Partners, you focus on the small-deal secondary market and secondary directs. How do you define those terms?

In private markets, investors come in all different shapes and sizes. Everything from massive pension funds and sovereign wealth funds, to endowments, foundations, individuals, and family offices. The average deal last year, according to investment bank Evercore, was $450mn. But most investors are probably not sitting on that much. The reality is there are thousands of investors with portfolios of $5mn, $10mn, $20mn, or $50mn. We’ve purpose-built Kline Hill to do the smaller deals, below $20mn, so we can provide good value and a great experience to sellers with smaller portfolios. This includes private equity, growth funds, venture capital, private credit, real estate, oil and gas, all different types.

And secondary directs?

A secondary direct is where a secondary fund will buy a direct interest in a single company and put it on their balance sheet. For example, SpaceX is a popular one right now that’s a private company. Investors that solely invest in secondary directs have seen a little bit tougher performance than some of the more diversified investors, but it’s a really neat way to get liquidity in private companies.

What’s changing in secondaries?

Growth jumps right off the page at you. Over the last two years, the market’s grown about 25–30% each year, so compounding to over 60% in just two years. If that happens for a third year, it will mean the entire secondary market will have doubled in three years.

The second thing is we always see a few new entrants each year. And every couple of years, there will be a firm that’s been very successful and grown in size that graduates to doing bigger deals. One of the unique things about Kline Hill is even though we’ve grown a lot since inception, we keep doing small deals. We did over 150 deals last year, which is by far the leader in the industry for these smaller deals.

Who are the investors and fund managers you work with?

One deal Kline Hill Partners led was a single-asset continuation vehicle with NORD Holding for All Inclusive Fitness Group, a German gym chain. Our team has done a lot of work in Germany, and we've done a lot of successful work with different fitness concepts over the years. It’s a space that’s fairly fragmented. This chain is one of the players that are buying up independent businesses, bringing them onto their platforms, making standardized branding, and creating larger companies. It’s similar unit economics to other fitness continuation platforms we’ve done, so we’re quite excited about it.

You sold a minority stake in Kline Hill Partners to TA Associates just over a year ago. How’s that worked out?

We knew TA Associates because they had a great reputation. They’ve been around for 50 years. They have 200 people on their deal team, so they have massive exposure and a footprint in the industry. They’ve also done a lot of investing in our space. We saw this transaction as a really attractive approach, where instead of selling all of Kline Hill, we sold a minority. We’ve gained a very strong partner in the private equity industry. We’re layering on a lot of the TA knowledge and learning a lot from them.

You’re based in Connecticut, but you opened a London office last October, your second in Europe after Zurich. Why are you expanding in the region?

We consider Europe a very important part of where we’re investing our funds. I think you need to have a local presence to be intelligent about assets, as opposed to just doing it all from the US.

We first decided to expand into Europe in 2021, and our team in Zurich now includes nine people. However, London is clearly the financial hub for Europe, and we’ve missed having a local presence there. James Bradshaw, who’s British, joined Kline Hill in the US several years ago, and he returned to London to launch the office. We now have six people there and we’ll be staffing up over the coming years.

Shaun Beaney is Editor of Preqin First Close. It’s quick, easy, and free to subscribe here.

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Special thanks to Kelly Holman and Sneha Satish at Stanton PR, and Alexander Towey at BlackRock.

_{The views expressed are the opinions of Kline Hill Partners as of May 2026. They do not constitute an endorsement, recommendation, or any other advice, and are subject to change. The content does not necessarily express the views of BlackRock, Preqin, or any of their affiliates. Kline Hill Partners is not affiliated with Preqin.}