The market's liquidity crisis is driven by a fundamental disagreement. Limited Partners (LPs) suspect that long-held assets are overvalued, while General Partners (GPs) refuse to sell at a discount, fearing it will damage their track record (IRR/MOIC) and future fundraising ability. This creates a deadlock.

Limited Partners should resist pressuring VCs for early exits to lock in DPI. The best companies compound value at incredible rates, making it optimal to hold winners. Instead, LPs should manage portfolio duration and liquidity by building a balanced portfolio of early-stage, growth, and secondary fund investments.

General Partners (GPs) have shifted from viewing secondary sales as an LP-driven nuisance to a strategic tool. They now facilitate liquidity for investors to maintain their reputation and use continuation vehicles to retain top-performing assets beyond a fund's original lifespan.

PE firms are struggling to sell assets acquired in 2020-21, causing distributions to plummet from 30% to 10% annually. This cash crunch prevents investors from re-upping into new funds, shrinking the pool of capital and further depressing the PE-to-PE exit market, trapping investor money.

The private equity market has abundant capital and willing companies, yet transactions are stalled. This is because General Partners (GPs) fear selling at low returns and Limited Partners (LPs) fear over-commitment due to liquidity concerns, creating a gridlock where no one wants to act.

Private equity's reliance on terminal value for returns has created a liquidity crunch for LPs in the current high-rate environment. This has directly spurred demand for fund finance solutions—like NAV lending and GP structured transactions—to generate liquidity and support future fundraising.

As top startups delay IPOs indefinitely, institutional portfolios are seeing their venture allocations morph into significant, illiquid growth equity holdings. These "private forever" companies are great businesses but create a portfolio construction problem, tying up capital that would otherwise be recycled into new venture funds.

The independent sponsor model allows for longer hold periods, focusing on maximizing a single asset's value. This avoids the fund-driven temptation to sell successful companies prematurely to show a high IRR to LPs for the next fundraising round, capturing more value in the later years of an investment.

When evaluating a deal, sophisticated LPs look beyond diversifying customers and suppliers. They analyze the number of viable exit channels. A company whose only realistic exit path is an IPO faces significant hold period risk if public markets turn, making exit diversification a key resiliency metric.