Investors today are facing more complexity, distribution rates that have fallen by almost 50% since the Covid pandemic and less certainty of returns as they evaluate private markets.
Record growth in private equity secondaries – which reached $226 billion in transaction volume in 2025 – is helping to provide institutions with a critical tool to manage liquidity more strategically, yet at the same time it raises questions over the structure of private equity funds; are longer timeframes of 10-plus years needed, rather than five to seven years, to allow companies more time to grow into their valuations? And why should investors even consider primary fund allocations in the first place when secondaries provide so many advantageous features?
“I think we’ll see a structural shift in the private equity market. Longer holding periods are here to stay,” remarked one institutional LP.
Investors are faced with overwhelming choice within private markets which have doubled in size to $16 trillion in AUM over the past five years alone. It is a situation far removed from the good old days of LBOs, VC and Infrastructure to one where private equity, alone, has been sliced and diced into multiple categories, from growth equity to buyouts, co-investments, continuation vehicles etc.
To navigate this complexity, allocators should focus on what can be controlled: maintain a long-term perspective, know your portfolio and look for firms of the future.
Opinions varied over which areas of private markets offer the most attractive opportunities in this world of uncertainty and AI transformation – infrastructure has much to offer, given the demands in Europe, especially for power generation and data centre development, lower mid-market buyouts are still ripe for alpha generation, while large-cap buyouts provide predominantly market beta, with allocators noting that geographically, the US and Asia are most attractive for growth and outperformance. Europe is viewed as more of a ‘Steady Eddie’, providing stable, yet lower returns.
Endowment returns appear set to reflect a sharply uneven market, with exposure to AI-related companies, hyperscalers and selected venture-backed names potentially determining whether institutions outperform.
That may improve reported results following several difficult periods, but it also risks obscuring the underlying sources of performance and the extent to which portfolios have become concentrated around a single theme. While concentrated allocations have been rewarded in the current environment, leverage, momentum and career risk can encourage investors to pursue late-cycle exposures at the expense of diversification.
To navigate a safe route through private markets, LPs want reassurances. To the point above on sources of performance, it was noted during the LP Congress that three key ingredients are needed in GP/LP relationships:
- Engagement
- Transparency
- Alignment of interests
That last point is germane when allocators are doing their due diligence on continuation vehicles: specifically on whether to sell, to roll into the CV, or some combination of sell/reinvestment. Rarely are these deals acted upon systematically; they vary from case to case. Knowing the extent to which the GP is aligned, based on how much of their own capital they commit to the CV, is an important factor; one that also alludes to the GP’s true motivation; have they already tried to sell the company before? Have they previously owned the company in a prior fund and have full confidence in future growth?
“Single asset CVs made up 14% of PE exits in 2025. They are a force to be reckoned with,” said a prominent European institutional allocator.
While it is true that PE secondaries and continuation vehicles are becoming more significant mechanisms for portfolio repositioning, liquidity management and maintaining ownership of assets for longer, their growth also gives investors more routes to build concentrated positions, strengthening the case for LPs who adopt a total portfolio approach.
To further flex on the GP/LP dynamic, LPs themselves recognise that they too have to do more.
As one institutional allocator said:
“Thinking about how to be a preferred partner is becoming very important. Can you provide more than just capital; i.e. introductions to commercial partners. You have to think about how to be accretive to GPs.”
Broadly speaking, there was consensus at LP Congress that primary and secondary investments are complementary components of private-markets portfolios rather than mutually exclusive alternatives.
While primaries provide long-term access to high-conviction managers, relationship advantages and greater upside potential, secondaries can offer faster deployment, diversification across managers and vintages, downside mitigation and earlier distributions.
The key challenge is to determine how primaries and secondaries should coexist within a total-portfolio framework, taking account of capital availability, team capacity, vintage diversification, expected return profiles and access.
Looking ahead, there are many challenges for allocators to overcome as they think about their private market allocation programs. The good news is that the toolkit is growing to help them find alpha and reassure their investment committees.
“It’s not the time to give up on private equity,” extolled one US allocator.
Not everyone shared that view at LP Congress.
But one theme rang true:
Allocators recognise the complexity that lies ahead and are fully prepared to master the course.
-1.png)
.png)
