MSCI Warns Private Markets Enter ‘New Phase’ of Liquidity Pressure and AI Repricing
Private markets are entering a new phase defined by liquidity pressure, valuation scrutiny, and the rise of AI-linked investments, according to MSCI’s new State of Private Markets report. The analysis draws on data covering more than $17 trillion across 15,000-plus closed-end funds and finds that private assets now account for nearly one-fifth of large institutional portfolios.
Persistent constraints around exits and distributions remain central to the industry’s challenges. Slower exits and extended holding periods are limiting capital returned to investors and fueling a tougher fundraising backdrop, with secondary markets and continuation vehicles playing a growing role in generating liquidity.
MSCI notes that 25% of venture portfolio value is now tied up in investments eight years old or older, while the share of private equity distributions from older funds flowing into continuation vehicles has climbed to 32%, up from 6% before 2022.
The report also highlights a widening divide between large and smaller managers as conditions tighten, with fundraising up 47% for larger managers versus 21% for smaller firms.
In private credit, MSCI flags increasing scrutiny of valuation practices and redemption management in semi-liquid evergreen structures alongside rising borrower strain, particularly at smaller funds, which have seen higher impaired-loan rates than larger peers.
“Liquidity pressure, uneven confidence in marks, and recent stress in private credit are all rooted in a structural lack of transparency,” said Luke Flemmer, MSCI’s head of private assets. “Investors need to know what they own, what those investments are worth, and where risk lies to successfully manage public and private assets together.”
AI-related investments are a major theme, with MSCI estimating that AI-linked assets now represent roughly 16% of global private equity, or about $739 billion of the $4.5 trillion market. These exposures extend across private equity, infrastructure, real estate, and credit—often via data centers and related energy systems—and frequently cut across traditional strategy labels, requiring more integrated portfolio analysis.
The report also points to the rapid expansion of evergreen structures, which have surpassed $500 billion in assets and, in many cases, outperformed certain closed-end peers across private equity, credit, and real estate.
At the same time, MSCI warns that questions around valuation discipline and redemption management are becoming more important as evergreen vehicles broaden access to private markets. Investors, the firm adds, are increasingly adopting total-portfolio and factor-based frameworks that integrate public and private exposures to better assess risk and opportunity across the capital stack.
