the liquidity squeeze caused global distributions or profits to investors last year to sink to 13.4 % of net asset value, well below the 25 % average posted from 2010 to 2021.
“ The longer companies remain private, the more important liquidity becomes,” says Logan Henderson, founder and CEO of Gridline, a turnkey alternatives management platform in Atlanta.“ Investors and advisors are increasingly focused not only on growth potential, but also on understanding realistic pathways to exit and return capital.”
The Emergence of Continuation Funds, Secondary Deals
Asset managers are indeed creating pathways to exits for fund managers. One of the innovative vehicles emerging to give investors liquidity while allowing companies to remain private is the continuation fund. This allows primary equity fund companies to return capital to original investors by selling existing or aging holdings before a fund matures. Investors can cash out or roll their investment into these funds.
A survey by secondary market specialist Coller Capital of 108 global private capital investors managing about $ 2 trillion in assets found that 40 % of them expect the use of continuation vehicles to increase, even when exit conditions improve.
“ Investors who want the liquidity can sell to investors who believe that there’ s more value to be created within the next phase,” says Ju-Hon Kwek, senior partner at McKinsey. Continuation vehicles, he says, are not so much“ like a parking lot. It’ s really about being a bridge to the next phase of value creation in the story.”
These vehicle transactions are fueling sizzling growth in the private equity secondary market( where private equity interest is transferred from one investor to another, typically at a discount).
Secondary markets have evolved from a niche corner of private investing into a critical liquidity mechanism, according to Gridline’ s Henderson, and have become the primary path for many investors to realize returns in lieu of a private company’ s initial public offering or acquisition.
“ The broader private markets ecosystem is adapting to a world where IPOs are no longer the default exit strategy,” he says.“ As more value creation occurs before companies go public, secondary markets are likely to play an increasingly important role in how capital is recycled and returns are generated.”
Calling private equity secondaries“ one of private markets’ most compelling opportunities” for asset allocators, investment management firm Neuberger Berman noted that transaction volume in secondaries has grown to $ 240 billion in 2025, up nearly 48 % over the prior year’ s record of $ 162 billion, with general partner firm-led deals leading the way.
Critics contend, however, that some PE funds are marking up the value of illiquid companies that they can’ t exit and then increasing the management fees they charge outside investors accordingly, even when their investors realize no gains. A recent Wall Street Journal article noted one case where the fees translated into 4 % of the fund’ s net assets.
Private Markets Awash In Capital
Market observers note that many companies in the private markets have little trouble accessing capital to satisfy their financial needs, so their managers don’ t feel compelled to go public.
“ They can get what they need today out of the private markets,” says iCapital’ s Duff.“ There’ re lots of additional ways for companies to build brand today. If they can stay private and continue raising money for their needs in the private market, that’ s a heck of a lot easier.”
Registered investment advisors themselves have seen this as private equity firms flood their industry. Many sizable firms, some with more than $ 100 billion in assets, are backed by private equity partners.
“ Most of these RIAs are incredibly cashgenerative, such that they don’ t need the capital of the public markets,” says Brett Schlemovitz, president of StepStone Private Wealth, the wealth management arm of StepStone Group, a global publicly traded private markets investment manager that oversees $ 885 billion in assets.“ The only reason they want to go public or might go public is to exit one of the private equity investors.”
In fact, the RIA space is so awash in PE capital that most RIAs simply replace one PE partner with another. Take examples like Constellation Wealth Capital, which took a minority stake in Merit Financial Advisors, a fast-growing RIA in Atlanta with $ 20 billion in assets, replacing Wealth Partners Capital Group and HGGC’ s Aspire Holdings.
Industry managers and observers can’ t peg when the IPO market might snap back, but some note that the public offering of SpaceX this summer for more than $ 1 trillion and the pending IPOs of other big AIfocused players Anthropic and OpenAI might encourage other private companies to take the public plunge.
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