Private equity fund investors agreed $9bn of alternative structured transactions last year as they sought liquidity from ageing fund positions amid a continued slowdown in exits and distributions, according to a report by the FT citing data from Jefferies.
The total was up from $6bn in 2024, with the investment bank expecting activity to continue rising this year as LPs look for ways to raise cash without selling fund stakes at a discount in the traditional secondaries market.
The transactions include preferred equity deals, where a buyer provides upfront cash in return for priority access to future distributions from the underlying funds until its capital and a minimum return have been repaid. The original investor then retains most or all of the remaining upside.
Jefferies said the trend is being driven by longer holding periods for private companies and several years of reduced distributions from buyout funds. Family offices and insurers are among the investors using the structures, while demand has broadened across secondary buyers, preferred equity specialists and private credit managers.
Credit funds, including those managed by BlackRock’s HPS, as well as equity and credit secondaries funds such as those managed by Goldman Sachs Asset Management, have been active in the market. Last year, Carlyle AlpInvest also agreed to acquire $600m of fund interests from Federated Hermes through a preferred equity structure.
Jefferies added that weaker distributions have also prompted a rise in standalone secondary sales of co-investments, where LPs hold direct stakes in companies alongside private equity funds.
