Private markets adapt as institutions embrace secondaries for enhanced liquidity amid rate pressures

Institutional investors are recalibrating how they manage private market exposure as lingering rate pressure, market volatility and a constrained exit environment elevate liquidity concerns, according to a Cerulli Associates report cited by Markets Media.

According to the original report, private equity now represents $2.1 trillion of a $20.4 trillion asset base among surveyed institutions, and illiquidity was identified as the top concern for private allocations by 59% of asset owners in Cerulli’s 2025 North American institutional survey. Fee worries followed closely (53%), while 28% of respondents flagged managers’ ability to exit investments profitably as a worry. The company said in a statement that these dynamics have encouraged institutions to broaden liquidity-management tools beyond traditional capital calls and hold-to-maturity strategies.

That shift is visible in greater use of secondary-market sales and expanding interest in evergreen or open-end private vehicles. “Secondary market transactions, traditionally a tool for investors in distress, have become more mainstream in the institutional space,” says James Tamposi, associate director. “The pricing discounts have continued to shrink, allowing secondary sellers to take less of a haircut when they need access to liquidity or simply adjust exposures. As the secondary market becomes more of a tool for portfolio management, asset owners have more flexibility to reshape their private market exposures and pursue opportunistic initiatives,” he concludes. According to Cerulli, these transactions now serve both as a safety valve for sellers and as a means for buyers to assemble exposures more selectively and potentially enhance risk-adjusted returns.

Market-era factors are amplifying the trend. Industry data and market commentary show a marked acceleration in secondaries activity: global transaction volume jumped in early 2025 as limited partners faced prolonged negative net cash flows and narrowing bid‑ask spreads made disposals less punitive. At the same time, structural headwinds to public exits , including weaker IPO markets , have pushed more companies to remain private for longer, reinforcing demand for liquidity solutions within private portfolios.

The changing policy and regulatory environment is also reshaping behaviour. Cerulli’s research and reporting from the higher-education sector suggest that proposed taxes and heightened regulatory scrutiny are prompting endowments and other tax‑exempt institutions to reconsider allocations and prioritise liquidity. The company said in its release that these pressures are contributing to renewed appetite for secondary transactions and more liquid private structures.

For institutional allocators, the practical implication is a move from viewing secondaries as a last resort toward treating them as an active portfolio-management lever. Industry participants note growing pools of dedicated secondary capital and product innovation , from evergreen vehicles to insurance‑facing structures and retail-oriented wrappers , that expand options for liquidity, diversification and tactical rebalancing.

While private markets continue to offer the sought-after, often uncorrelated return stream that has driven 15 years of capital deployment, Cerulli’s findings underline a new emphasis: balancing return-seeking with the operational and regulatory realities that can constrain exits. The report recommends that asset owners integrate secondary-market strategies and more flexible vehicle types into liquidity planning, while maintaining scrutiny over fees and manager exit capabilities.

As institutions adapt, the secondary market’s maturation is likely to remain central to private-market liquidity management , providing sellers a pathway to convert illiquid holdings and buyers an opportunity to deploy capital into curated vintages and strategies with potentially attractive risk‑adjusted profiles, industry sources say.