Prolonged interest rate struggles, market volatility, government policy changes, and a sluggish private equity exit environment have bolstered institutional investors’ concerns about liquidity. In light of these challenges, institutions are focused on expanding their liquidity management approaches, leveraging a traditionally limited practice of secondary market sales and opening the door for open-end fund use in private market exposures, according to The Cerulli Report—North American Institutional Markets 2025.

As private markets continue to offer premium, uncorrelated returns, institutional investors have spent most of the past 15 years rushing capital into private market strategies. To date, private markets have been one of the few reliable sources of returns for institutional investors, frequently displacing active managers across the equity and fixed-income universes. Across channels, asset allocation to private equity ranges from 3.0% for health insurance general accounts to 33.3% for endowments. Cerulli estimates private equity exposures account for $2.1 trillion of the total $20.4 trillion of assets.

While volatility and unique factors (e.g., a pullback in federal funding) have led to a liquidity crunch more broadly, the private market investing environment has presented an additional layer of concern about liquidity. Among institutional asset owners surveyed by Cerulli in 2025, illiquidity emerged as the number one concern about their private investment allocations (59% of asset owners), closely followed by concerns about fees (53%). A smaller subset (28%) cites concerns about managers not being able to exit investments profitably.

With the exit environment a cause for concern, investors have increasingly leveraged secondary markets and evergreen funds to manage liquidity. The need for liquidity has driven secondary market transactions to new heights. While providing a safety net for secondary sellers, secondary markets offer buyers the potential to capture better risk-adjusted returns by employing a more detailed approach to building their exposures. Similarly, the private evergreen fund space has grown, offering investors increased flexibility via the ability to tactically adjust exposures and enhance the liquidity of their private market portfolios.

“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.