What is one reason that secondary purchases may offer lower prices?

Secondary purchases often provide lower prices primarily because sellers are typically distressed. In the secondary market, selling parties might be facing urgent liquidity needs or other financial pressures, which compels them to sell their stakes quickly, often at a discount. This sense of urgency can result in price reductions, as sellers prioritize immediate cash flow over potential future gains.

While historical performance uncertainty can affect valuation, it does not specifically lead to lower prices in the same direct way that distress among sellers does. Additionally, although more investors competing for stakes can arguably drive prices up, the presence of distressed sellers typically has a more pronounced downward impact on pricing due to urgency and the necessity to offload assets quickly. Higher premiums in primary markets could indicate stronger demand and be a factor in overall market conditions but are less relevant to the specific dynamics of secondary purchases, where the motivations and conditions of sellers play a decisive role in pricing.