Why it happens · Growth & late-stage investors
Portfolio rebalancing for growth funds
A growth-stage fund that has ridden a company from Series C to a $10 billion-plus valuation may have a single position representing an outsized share of the fund. Trimming that position via a secondary sale — selling part of the stake to a new investor at the current valuation — locks in returns and reduces concentration risk without forcing an exit from the company entirely.
Worked example
A worked example of a concentration trim (illustrative figures):
- A $1.25 billion fund holds a single position now worth $150 million — 12% of the entire fund, well above the fund's own internal concentration guidelines.
- The fund sells $60 million of that position via a negotiated secondary sale to a new investor, pricing it at a slight premium (105% of the last primary round) because demand for the name is strong.
- After the sale, the fund's remaining $90 million position is about 7.5% of the fund — back inside its concentration limits — while it keeps meaningful upside exposure to the company instead of exiting entirely.
- The $63 million in proceeds (60M × 1.05) can be redeployed into new positions or returned to the fund's own LPs, depending on where the fund is in its investment period.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.