The PE "Recovery" is a Mirage
We’ve all seen the headlines claiming the PE recovery is here, but if you look under the hood, I think the engine is still stalling. Over the last two years, the game has shifted. It’s no longer about whether a GP can dress up a P&L; it’s about whether they can actually return cash to LPs. What started as a cyclical annoyance has turned into a full-blown structural crisis.
The macro data looks "okay" on the surface: global exit value hit $294B in Q3 2025, up 29% YoY. But the cash-back problem is far from solved. The real issue imo? Strategic buyers, who usually make up 50% of the exit pool, are basically MIA. Until they show up, there’s no real liquidity. Strategics are sitting on their hands because market volatility has made pricing a total guessing game, so they're choosing to hoard cash for internal capex rather than deal with the M&A headache.
If you want to see how "clogged" the pipes really are, look at cash distributions as a % of NAV. We’re currently at ~11%, which is a joke compared to the 20% long-term average. We’re basically at post-GFC lows. LPs are technically "rich" on paper, but their bank accounts are bone dry.
Since nobody can exit, assets are being held forever, creating a nasty feedback loop. LPs have no cash coming in, so they’re slashing commitment sizes and slowing down deployment. This has forced the Secondaries market to evolve from a niche rebalancing tool into essential infrastructure. When ~46% of LPs are hitting the panic button on LP-led deals just to keep their wheels turning, you know the situation is localized.
GPs are feeling the heat too. To avoid fire-selling their trophy assets, they’re leaning hard into continuation vehicles and NAV-based lending just to manufacture some synthetic liquidity. Looking ahead to 2026, we might see some marginal improvement, but anyone expecting a return to the pre-COVID "glory days" is dreaming.
The real silver lining here is the talent arbitrage. Demand for people who actually understand GP-led and LP-led secondaries is skyrocketing, while the supply of experienced bodies is almost non-existent. Secondaries is still the most underrated seat in high finance. If you want a role with actual velocity and a massive tailwind, I think now is the time to jump in.
bump
Big structural issues, still waiting to see what happens with some of the exits from the ‘20 and ‘21 investments given how many of them sit in continuation
Yeah spot on. A lot of those CVs are just GP purgatory for assets bought at 20x. Until we see those exits actually hit the tape at their marks, I think the liquidity crunch is here to stay.
Does anyone think there's a chance for consolidation in the space? I know it's for more complicated for limited partnerships to value and acquire one another and secondary stakes are becoming easier to transact but I can't help but imagine that many firms simply won't be able to continue even with those factors.
Perhaps we'll see something akin to the consolidation in the asset and wealth management space and firms start gobbling each other up just to rake in fees on assets that can't be easily offloaded.
Secondaries has been consolidating for the past 5 years. There’s very few independent firms left
I am once again asking you, begging you even, to STOP using ChatGPT to write your posts! Immediately makes me think less of your critical thinking abilities.
Like does no one know how to use AI but maintain a normal sense of voice? Diversify sentence structure? Avoid repetitive literary tropes? Jesus
I'll be honest man I did use it to tweak structure a bit but insights are my own lol
It reads like garbage.
My advice is to learn how to write the traditional way, mostly by reading nonfiction and adopting the style / vocabulary of authors you enjoy reading.
ChatGPT is making your writing worse, and I’m not just trying to rag on you – it’s a real problem in young professionals I’m seeing and it’s really repulsive / disappointing to see in otherwise bright developing professionals. ChatGPT is good at organizing ideas / maybe pointing you to real resources to read outside of ChatGPT - but NEVER get your sense of voice from ChatGPT, it’s painfully obvious.
true, I'm far more likely to read till the end a post by someone that has lots of typos than one perfectly crafted by AI
it feels so dull / emotionless, which lacks the touch to make me feel I am reading a human
Do yall think secondaries is a good place to join now as an analyst, or is it more of a temporary trend?
It's fine to use AI but please have it CUT the slop redundant words + use your tone of voice. It's so long winded for no reason...
IMO straight up AI posts like this should be banned. I don't come to forums for this...
i came to hear complain about AI slop posts but glad you all have already done so
If you think you are early to secondaries, I have some cov lite private credit loans to sell you at par. It’s not underrated, it’s well understood. Secondaries funds have existed since pre GFC. The carry for secondaries funds is going to be worth not nearly as much and the $ at work will be less than in traditional PE.
The reason people still do private equity is because once you go down the secondaries route, your options are limited. HBS / GSB don’t take secondaries kids. The hot AI startup is uninterested in the secondaries Principal to be the CFO / Head of Strategy ahead of an IPO. This won’t change.
Incidunt autem eos doloremque optio architecto ea delectus. Eum qui consequatur asperiores id voluptatem.
Amet aut illo placeat et ea assumenda. Quasi delectus iusto ut commodi. Quia magni aut iure consectetur deleniti ratione ipsa nihil.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...