About a year ago, New Jersey took the extraordinary step of disclosing details on secondary sales of private equity holdings from its pension funds. While not revealing the buyer(s) for the assets, New Jersey earns points for unveiling details that most public pension funds keep under wraps, either because of negative implications or pricing sensitivity.

The state sold stakes in 12 PE funds, including Madison Dearborn Capital Partners V-A, TPG Partners V and VI, and Thomas H. Lee Equity Partners VI. Proceeds came to $575 million, 93.75% of $613.5 million net asset value.

New Jersey's move suggests comfort with a process once viewed as the quirky cousin of private equity, but that is now accepted as an invaluable tool for disposing unwanted assets, raising cash or for managing portfolios. The secondary market has helped pension funds like the California Public Employees' Retirement System pare general partnerships to focus on a smaller group of funds. Banks have tapped these secondary channels to meet new regulatory mandates such as the Volcker Rule.

By most measures, the market has matured, even if it still trades only a fraction of total private equity capital. Last year produced between $20 billion and $25 billion of transaction volume, compared with $20 billion in 2010, according to industry estimates. By comparison, 2009, a time when expectations ran high for distressed sales, proved a bit of a dud due to extreme discounting.

This year promises to at least match 2011 if not exceed it. That has practitioners excited, citing intense activity atypical of January. "There are a lot more financial institutions and just a lot more supply coming out," says Stephen Can, global fund head of Credit Suisse Group's Strategic Partners secondary funds. Can points to $3.61 billion in assets in the firm's pipeline.

After the 2008 turmoil, secondary vehicles rebounded in 2009, raising a record $22.8 billion, followed by $10.8 billion in 2010, according to Preqin Ltd. New York's Lexington Partners amassed a record $7 billion in July.

Perhaps the single biggest change is that demand for assets has spiked, says Mathieu Dréan, managing partner of French advisory group Triago. The group pegs the amount of dry powder at $44 billion currently, versus a third of that five years ago. "This has driven sell-side transactions; now is an interesting time window," Dréan says.

Sellers say it's a good time to take advantage of pricing. The bid-ask spread has hovered in the 10% to 20% discount range to a 5% premium. And Triago points to attractive returns from secondary sales. Tracking all its deals between 2004 to 2011, the firm calculated an average return of 1.35 times, or 135% of money paid in, counting cash proceeds from secondary sales and distributions.

With European banks becoming big sellers, deals ex-Europe are averaging between $700 million and $1 billion, up from $500 million, says Benoît ­Verbrugghe, U.S. head of AXA Private Equity.

Also in the market are two first-­timers: New York City's five pension funds and the Government of Singapore Investment Corp. Both retained UBS to sell off $750 million in assets each. The sales will prune certain vintage years and rejigger portfolios, sources say. New York put out large sums of money during the boom and hopes to add top-performing general partners. CalPERS, which has sold at least $3 billion worth of holdings since 2008, will likely return to market with more digestible slices of what insiders call "flow" funds, or megabuyout funds, to ease overweighting.

One potentially large seller is Goldman, Sachs & Co., a major private equity investor and co-investor. Like other investment banks, the size of its PE assets will be restricted under the Volcker Rule. "They'll have to raise new funds eventually, and how they address this isn't clear," says one specialist. "We're all waiting to see what they'll do."

Vyvyan Tenorio writes about private equity for The Deal magazine.