A wave of large institutional investors — including pensions, endowments, and sovereign wealth funds — has begun actively exploring sales of private equity fund stakes on the secondary market to raise liquidity, according to a report by the Financial Times citing leading private capital advisers including Houlihan Lokey.
The sudden uptick in activity follows the sharp downturn in global financial markets, which has not only hammered public equity valuations but also upended cash flow assumptions underpinning private equity portfolios.
With exits stalled, IPO markets frozen, and distributions drying up, limited partners (LPs) are now under pressure to meet capital calls and rebalance overexposed portfolios.
“This is the busiest we’ve been since the early days of Covid,” said Matthew Swain, Head of Private Capital at Houlihan Lokey. “The call volume from LPs seeking liquidity is intense. They were counting on exits through IPOs — and now they’re just trying to cover capital calls.”
The implications for the $4tn global buyout industry are stark. Flagship firms such as Blackstone, KKR, and Carlyle saw their publicly traded shares fall between 15% and over 20% late last week, amid broader fears of a sustained liquidity crunch.
Many LPs entered 2025 already nearing or breaching their allocation thresholds for private markets, as private assets — which are marked to value quarterly — held steady while public markets swooned. The resulting denominator effect has significantly inflated private equity’s weight in overall portfolios.
“If public markets keep falling, this becomes a much bigger problem,” said Oren Gertner, Secondaries Specialist and Partner at law firm Sidley Austin. “We’re already seeing institutions with allocation drift turning to secondaries as the most immediate lever.”
With fresh capital increasingly scarce and fundraising down 23% year-on-year in 2024, according to Bain & Co, many GPs are also watching closely to see how LP selling could impact fund dynamics — particularly around co-investment appetite and re-up capacity.
According to bankers and placement agents, secondaries pricing — which had rebounded to near-par in recent quarters — is now under renewed pressure. Several advisers expect pricing for high-quality buyout fund stakes to fall below 80 cents on the dollar in upcoming transactions.
“There’s a price discovery moment coming,” said Sunaina Sinha Haldea, Global Head of Private Capital Advisory at Raymond James. “If public markets don’t rebound by the end of the month, we expect a material uptick in secondary volume — likely at discounts.”
Endowments are seen as early movers, driven not only by liquidity constraints but also by broader concerns about federal funding and potential tax policy changes under the Trump administration. Pensions and sovereign wealth funds are expected to follow, particularly those with heavy legacy exposure to 2018–2021 vintage funds that have yet to produce meaningful distributions.
A challenging road ahead for private equity
The sudden reversal in LP sentiment comes at a delicate moment for private equity fund managers, many of whom had expected a more favourable environment for exits and fundraising in 2025. Instead, they now face rising redemption risk, prolonged holding periods, and potential valuation resets.
“Everyone was hopeful the private equity machine would restart,” said one secondaries adviser. “But now the pressure is very real. Cash is tight, the exit window is closed, and the denominator effect is pushing allocators to the brink.”
For both LPs and GPs, the coming months could redefine what liquidity planning and portfolio construction look like in private markets — and potentially accelerate structural shifts in how capital is raised, recycled, and returned across the private equity landscape.
