Fed Up with Noise, LPs Get More Selective on Private Markets
Geopolitical uncertainty is increasingly influencing how institutional investors allocate capital to private markets, even as they remain committed to the asset class and seek new ways to generate liquidity, according to the latest Coller Capital Global Private Capital Barometer.
Just over a third of respondents (37%) say the geopolitical environment is influencing their private markets allocations more than in the past, rising to 46% of European investors and 47% of Asia-Pacific investors.
At the same time, nearly a quarter of LPs (23%) expect to reduce the number of GP relationships across their private markets portfolios over the next three years, up from 16% when Coller last asked the question in 2020. Yet support for the asset class remains solid: one-third (33%) plan to accelerate their pace of commitments, and 57% expect it to stay the same over the next two years. The survey covers 108 LPs worldwide, 55% of which manage more than $10 billion and collectively oversee more than $2 trillion.
Coller CIO Jeremy Coller said recent public market moves have put the exit window “back at the center of the conversation,” with secondaries now a core route to liquidity and portfolio rebalancing.
Zombie funds, credit secondaries and continuation vehicles
LPs are bracing for more “living dead” funds but favor pragmatic fixes over confrontation. A majority (54%) expect the number of zombie funds in their PE portfolios to rise over the next two years, and another 31% see them staying flat. In no‑fault situations, 54% prefer management fee step‑downs, 18% favor incentive resets, and only 11% opt for manager removal; 11% would take no action.
Private credit is entering a more selective phase. The share of LPs expecting to increase target allocations to private debt over the next 12 months has fallen to 29% from 42% in the prior Barometer. However, private credit secondaries are seen as a prime growth area: 36% of LPs rank credit as the asset class likely to see the greatest proportional growth in the secondary market over the next three years, ahead of private equity, infrastructure and venture capital. Only 18% believe there is a systemic problem in private credit; 53% see isolated risk above expectations, and 29% view risk as in line with expectations.
Continuation vehicles have become embedded rather than a temporary response to weak exits. Industry data show GP‑led secondary volume reaching about $106 billion in 2025 even as overall exit activity remained constrained. While 40% of LPs think GPs are generally striking the right balance between liquidity and value creation, 39% say liquidity is coming too late and 22% worry some of the best companies are being sold too early. Looking ahead, 40% expect continuation vehicle activity to keep rising, 29% see it holding steady and 31% predict a decline.
AI, evergreen capital and the limits of tokenization
LPs see artificial intelligence as operational, not yet a direct alpha engine. Seventy percent expect GPs to use AI primarily to improve cost efficiency over the next five years, versus 22% who see it as a return driver and 8% who view it as mainly a risk‑management tool. Still, 67% believe AI adoption will widen performance dispersion between leading and lagging managers; 33% think it could level the playing field. Gut instinct remains central: 61% say its importance in fund and co‑investment decisions is unchanged, and 22% see it increasing.
On structures, evergreen funds are expected to gain ground as private markets broaden their capital base. Nearly three‑quarters of LPs (73%) expect the share of private markets AUM held in evergreen vehicles to increase by 2035, including 36% who anticipate a significant rise. Tokenized funds, by contrast, remain niche in the institutional world: 85% of respondents do not expect their organization to access private markets via tokenized vehicles.
