Liquidity Is Available, but Not on Yesterday’s Terms

Private markets have historically required investors to accept longer holding periods in exchange for more controlled exits and consistent value creation. That expectation is now being tested.

Over the past 18–24 months, private equity markets have shifted into a condition where the number of potential sellers exceeds the number of natural buyers. Distributions have slowed, DPI has declined, and assets are remaining in portfolios longer than expected. The result is a timing mismatch across participants.

From this, we can infer that processes are taking longer to clear. Initial bids are coming in below seller expectations, leading to paused timelines, partial sales, or re-trades.

Drivers of Liquidity Pressure

The current environment reflects several overlapping forces.

Allocators are managing over-allocation to private assets following a faster recovery in public markets. At the same time, distributions have declined meaningfully. Distribution yield has fallen from approximately 25% of NAV (2013–2021) to roughly 12% in recent years.¹

Exit activity remains constrained. IPO markets are selective, strategic buyers are disciplined, and sponsors are extending hold periods. The average holding period reached 6.6 years in 2025, above historical averages, with a record number of companies held beyond four years.²

Distributions as a percentage of AUM have also declined to approximately 6% in the first half of 2025, well below long-term averages.³

Individually, these dynamics are manageable. Together, they increase the number of assets that could come to market.

This combination is not just slowing exits today. It is building a backlog of assets that will need to be addressed over the next several years, increasing forward supply regardless of near-term market conditions.

Alignment of Incentives

Private markets are cyclical, but the current environment is defined by alignment across participants.

LPs are seeking liquidity to rebalance portfolios. GPs need realizations to support fundraising. Lenders are more selective, limiting refinancing options. These are rational responses, but when participants act in the same direction, transaction activity slows, and pricing gaps persist.

Cash flows across the asset class have been negative for five of the past six years, reinforcing a shift toward liquidity and capital return.⁴

This alignment is visible in transaction dynamics. Sellers anchor to prior marks, while buyers price to extended duration and uncertain exits. The result is fewer cleared trades and longer negotiation cycles, even when both sides are motivated to transact.

The Role of the Secondary Market

The secondary market is often viewed as a solution to liquidity constraints. In practice, it facilitates transactions but does not resolve the underlying imbalance. For additional context, see Understanding Secondaries in Investment Portfolios.

Activity has increased, with global secondary volume reaching $162 billion in 2024 and $103 billion in the first half of 2025.⁵ However, pricing reflects current conditions. Average LP portfolio discounts widened to approximately 13.3% in H1 2025.⁶

Available capital in secondaries remains limited relative to demand, covering roughly 1.3 years of deal activity.⁷ As a result, transactions are occurring selectively and at prices that reflect both asset quality and timing risk.

Buyers are prioritizing assets with near-term exit paths, strong cash flow visibility, and limited dependency on multiple expansion. Portfolios with higher dispersion or longer duration are seeing wider discounts or reduced interest.

Sellers are more selective, and buyers are underwriting more conservatively, particularly around duration and exit visibility.

Use of Structured Solutions

Structured solutions, including NAV financing, preferred equity, and continuation vehicles, have expanded to address specific situations.

These approaches provide flexibility but primarily shift the timing of liquidity rather than increase it. GP-led continuation vehicles have grown from approximately $35 billion in 2020 to $115 billion in 2025, reflecting increased reliance on internal liquidity solutions.³

These solutions introduce additional complexity. They extend duration, layer in new capital structures, and can concentrate risk at the asset level. While they address immediate liquidity needs, they often defer the underlying exit question.

Where Opportunities Are Concentrated

Opportunities are more targeted.

Transactions are concentrated in assets with clearer exit visibility, in portfolios with concentrated value drivers, and in situations where selling decisions are driven by allocation needs rather than performance.

Approximately 40% of secondary sellers in 2024 were first-time participants, indicating that liquidity needs are often structural.⁷ At the same time, high-quality buyout assets traded near 94% of NAV in H1 2025, reflecting continued demand for mature assets.⁸

Capital that remains active is concentrated among buyers with flexible mandates and longer time horizons. These investors are less constrained by near-term liquidity needs and are positioned to transact where others step back.

The Current Constraint

The primary constraint is not the availability of capital, but the willingness to deploy it.

Investors are placing greater emphasis on timing and exit certainty. Sellers must decide whether to accept current pricing to access liquidity. This gap continues to limit transaction volume.

Markets will adjust, but the process is likely to be gradual.

For sellers, the decision is increasingly binary: accept current pricing to generate liquidity, or hold assets with the expectation of improved conditions. This trade-off is delaying transactions rather than eliminating them.

Conclusion

Liquidity in private markets continues to exist, but at different price levels, over longer timeframes, and across a narrower set of transactions.

Participants expecting a broad normalization may face a longer adjustment period. Those willing to transact within current conditions are already active.

The key question is not whether liquidity returns, but which participants are positioned to act under current market conditions.

About Axis Group Ventures

Axis Group Ventures is a boutique investment banking and strategic advisory firm focused on global debt placement and private market secondaries for venture- and private equity-backed companies. We work with founders, CFOs, and investors to structure and execute tailored capital solutions, drawing on deep experience in private credit and a global network of capital providers.

Our approach emphasizes disciplined, independent advice and hands-on execution, with a focus on improving transparency and alignment in complex financing decisions.

For more information, visit www.axisgroupventures.com

Sources:

1. Northleaf Capital Partners, “Private Equity Market Update Q1 2025,” Northleaf Capital, https://www.northleafcapital.com/news/private-equity-market-update-q1-2025

2. McKinsey & Company, “Beating the Odds: How Private Equity Firms Can Improve Exit Prospects,” McKinsey & Company, https://www.mckinsey.com/industries/private-capital/our-insights/beating-the-odds-how-private-equity-firms-can-improve-exit-prospects

3. McKinsey & Company, “Global Private Markets Report: Private Equity,” McKinsey & Company, https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report/private-equity

4. With Intelligence, “Private Equity in 2025,” With Intelligence, https://www.withintelligence.com/insights/private-equity-in-2025/

5. Jefferies, “Global Secondary Market Review July 2025,” Jefferies, https://www.jefferies.com/wp-content/uploads/sites/4/2025/08/Jefferies-Global-Secondary-Market-Review-July-2025.pdf

6. Barclays Private Bank, “Spotlight on Private Equity Secondaries,” Barclays Private Bank, https://privatebank.barclays.com/insights/market-perspectives-september-09-2025/spotlight-on-private-equity-secondaries/

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Disclosures & Disclaimers

This blog post is provided by Axis Group Ventures for informational and educational purposes only. It does not constitute investment, legal, accounting, or tax advice, and should not be relied upon as such. Nothing contained here should be interpreted as an offer to buy or sell any securities. Any actual offer or solicitation will be made exclusively through formal documentation provided by the relevant issuer or seller.

Axis Group Ventures is not a registered broker-dealer and does not execute, negotiate, or recommend the purchase or sale of securities. Any introductions or private-market support provided by Axis Group Ventures are conducted strictly in an advisory and consulting capacity. Readers should conduct their own due diligence and consult qualified professionals before making any financial decisions.

Investments in private securities involve significant risks, including the potential loss of the entire investment, and are typically illiquid. Past performance does not guarantee future results.