In late November, BNP Paribas SA joined the long line of banks and financial institutions said to be considering the sale of large portfolios of private equity fund investments. At a reported $700 million, it will be one of the more substantial portfolios to come to market -- though less than half the size of the $1.7 billion sold by Citigroup Inc. earlier in the year.

But there's no danger that either the French bank's offering or the slew of further portfolios expected to follow in the coming months will stretch the capacity of secondary buyers to absorb them. Nor are they likely to have much effect on price. The market has long been preparing for these sales.

As fundraising for conventional primary private equity investments has become more difficult in the aftermath of the financial crisis, many traditional buyout houses and fund investors have turned their attention to what are now perceived to be the juicier returns and easier pickings in the secondary market. The long-established secondaries firms, such as Coller Capital Ltd., AXA Private Equity and Lexington Partners LP -- which closed a record-breaking $7 billion fund in July -- have been joined by less-seasoned players all wanting a slice of the action. Some are family offices, others may be hedge funds or pension fund managers who believe they can do better on their own than investing through fund-of-funds managers who charge a second layer of fees. The new entrants may be no more than opportunistic "tourists," hoping to snatch a handful of low-hanging fruit and hop back on the tour bus; or they may be serious, long-term actors. Either way, they bring substantial volumes of cash looking for a target. According to private equity research specialist Preqin Ltd., 20 secondaries funds closed in 2010, raising an aggregate $11.6 billion, while a further 15 secondaries funds had closed by late November, raising a total of $10.2 billion.

Most tellingly of all, according to Preqin (which says it only tracks dedicated fund-of-funds vehicles and not opportunistic allocations by nonspecialists for ad hoc secondary purchases), there are 29 secondaries funds currently on the road. These funds alone are seeking to raise $19.2 billion.

Several forces are driving this activity, none of them mysterious. Banks and insurers in particular face pressure to dispose of private equity investments, which must be backed up with expensive capital allocations under new capital adequacy and solvency regulations. At the same time, pension funds and other investors who piled into private equity in the boom years now expect falling returns. Some will consolidate their portfolios around a limited number of key managers. Others may want to get out of private equity altogether. Many may regard selling to secondaries funds as an efficient tool of portfolio management for illiquid investments. But all will be unloading assets on a willing market for some time to come.

Separately, there is also a thriving market for secondary direct investments. Institutions may want to divest a limited partnership holding in an individual buyout or venture fund and will often sell to the growing number of specialist firms keen to acquire either a piece of a particular fund or exposure to a particular general partner. These firms will likely choose their purchases according to a particular strategy -- perhaps only investing in holdings where the capital calls have already been made, or those which are only 50% drawn down, perhaps only seeking distressed investments. In each case the specialist firms will tailor their price accordingly.

They may also find their access has to be approved by the GP of the investee fund. GPs don't really care what price the exiting limited partner achieves for its holding, but they may insist secondary buyers make a commitment to invest in the firm's next fund, veto investment by known activists and troublemakers or reject distressed investment specialists, whose mere presence in a fund could damage the manager's reputation as a safe pair of hands.

As in any market, price is the key. The secondaries industry is notoriously secretive and prefers to keep price reporting to a minimum, despite the efforts of a few entrepreneurial online exchanges that try to match buyers and sellers with transparent pricing spreads. Other brokers and their clients feel the market is not yet either commoditized or mature enough for these exchanges to price secondaries efficiently. A few such plain-vanilla offerings might work where the asset is an LP holding in a big-name buyout fund, for instance. In such cases, competition may be fierce, discounts to net asset value are small, perhaps only 5% in the current market, and the returns are likely to be minimal.

But the more esoteric or difficult the asset -- perhaps hedge fund investments held in a private equity fund's "side pocket" -- the deeper the likely discount to NAV. According to London-based secondaries broker Cattegatt Capital Ltd., holdings in Eastern European distressed funds, African mining projects and Indian real estate, for instance, all recently fetched discounts of 50%-70%.

And for many players now, the issue is less the number of assets on the market or the vast quantity of dry powder available to would-be buyers, but the traditional private equity bugbear of uncertainty of outcome. According to one sell-side adviser who declines to be named, prices have come off from the 5%-10% discounts to NAV seen in the first half of the year. They are now likely to be closer to 15%-20%, as buyers have become more cautious. With continuing volatility in the wider economy, the adviser predicts, the market will still transact, but at a lower level. While funds are keen to invest, the sell-side adviser says that "there is no sense of people falling over each other to do deals or get money out of the door."

Of course, he adds, if the euro falls apart, "then all bets are off."

But then if the euro falls apart, all bets are off in every market, and in every other aspect of daily life, not just the arcane world of private equity secondaries.