In a shifting global financial environment, institutional investors are increasingly looking beyond traditional real estate strategies. One area that has gained significant traction in recent years is real estate secondaries—a once-niche market that has now become a central allocation in sophisticated portfolios. At the forefront of this transformation is StepStone Group, a global investment firm that has successfully positioned real estate secondaries as a core asset class.
What Are Real Estate Secondaries?
Real estate secondaries involve purchasing existing interests in closed-end real estate funds, allowing investors to enter established portfolios with known assets, income streams, and risk profiles. Unlike primary fund investments—which often come with blind pools and multi-year capital calls—secondaries provide greater visibility and faster capital deployment.
These transactions are typically made at a discount, particularly when the original investor seeks liquidity. As a result, secondaries offer potential for enhanced returns while mitigating many of the uncertainties associated with development or early-stage assets.
StepStone’s Early Entry and Strategic Focus
StepStone began focusing on secondaries in the early 2010s, investing in dedicated platforms and analytics long before the strategy became mainstream. The firm developed a data-driven approach that evaluates thousands of fund positions across asset types, geographies, and economic cycles.
As of 2025, StepStone manages over $25 billion in real estate assets, with more than $8 billion allocated to secondaries. This growth has been fueled by:
- Access to large institutional portfolios looking to sell stakes
- A robust sourcing network with global GP and LP relationships
- Advanced valuation models to price assets with precision
Why Secondaries Became “Core”
Historically viewed as opportunistic or cyclical, real estate secondaries have now evolved into a stable, scalable investment strategy. StepStone helped change the perception of secondaries from reactive positioning to strategic core allocation by proving their reliability across market cycles.
Key advantages include:
- Reduced J-curve: Immediate exposure to yielding assets
- Lower risk: Transparent and seasoned portfolios
- Attractive entry points: Discounts ranging from 5–20% during market dislocations
- Diversification: Access to multi-sector, multi-region holdings in a single transaction
As liquidity needs grew post-COVID and during interest rate volatility, StepStone’s secondaries platform became a go-to solution for pension funds, endowments, and sovereign wealth funds.
Notable Transactions
StepStone has executed a series of high-profile secondary deals in recent years, including:
- $350 million interest in Blackstone Real Estate Partners, acquired at a 12% NAV discount
- €1.2 billion portfolio of European logistics funds, with stabilized cash flows and low vacancy
- Strategic buyout from a Canadian pension plan, enabling the seller to rebalance private market exposures
These deals produced IRRs of 14–16%, outperforming many traditional real estate strategies while offering greater liquidity and transparency.
Role of Technology and Analytics
At the heart of StepStone’s success is its proprietary analytics platform, which supports:
- Real-time NAV tracking and fund performance monitoring
- ESG scoring and integration at the asset and fund level
- Scenario modeling for downside protection and macro sensitivity
- Portfolio construction tools to align with investor mandates
This data-first methodology allows StepStone to filter and price opportunities faster and more accurately than most market participants.
Comparative View: Secondaries vs Other Real Estate Strategies
| Strategy | Description | Returns | Risks |
|---|---|---|---|
| Core/Core+ | Stabilized, income-producing assets | 5–7% | Market corrections |
| Value-Add | Asset improvements, repositioning | 8–12% | Execution and leasing risk |
| Opportunistic | Development or deep repositioning | 12–18% | Construction, timing risk |
| Secondaries | Buying into existing funds at discount | 10–14% | Liquidity, pricing accuracy |
This positioning makes secondaries uniquely attractive in a high-interest-rate environment where many primary markets face capital constraints.
Who Is Investing?
The growth of secondaries has attracted a broad mix of institutions, including:
- Global pension funds seeking mid-term yield with transparency
- Insurance companies diversifying from traditional fixed income
- Fund-of-funds managers optimizing blended exposures
- Private wealth platforms launching secondary-focused feeder vehicles
In 2023–2025, StepStone saw record allocations into real estate secondaries due to:
- Tight debt markets limiting new development
- Delays in primary fundraising cycles
- A strong pipeline of mature fund interests hitting the market
Future Outlook Through 2030
Market analysts expect the global real estate secondaries market to exceed $200 billion annually by 2030. StepStone plans to expand its platform to $15 billion in AUM by 2027, focusing on:
- Regional diversification into Latin America and Asia-Pacific
- Customized mandates for institutional clients seeking thematic exposure
- Technology investment for enhanced underwriting and fund matching
Conclusion
StepStone has fundamentally reshaped how the market views real estate secondaries. What began as a small, illiquid corner of the private markets has, through disciplined execution and data-driven insights, become a foundational asset class for global investors.
With secondaries now delivering robust returns, immediate yield, and risk-adjusted performance, StepStone has not only capitalized on the trend—it has helped define it.
As real estate portfolios evolve, secondaries are no longer niche—they’re core.
