Institutions Turn to Secondaries and Evergreen Funds as Liquidity Pressures Mount
Prolonged rate uncertainty, market volatility, shifting public policy, and a sluggish private equity exit environment are sharpening institutional investors’ focus on liquidity. In response, institutions are expanding their liquidity toolkits beyond occasional secondary sales and increasingly considering open-end and evergreen structures to manage private market exposures more dynamically, according to The Cerulli Report—North American Institutional Markets 2025.
Over the past 15 years, private markets have been a rare bright spot, delivering premium, relatively uncorrelated returns and often displacing traditional active equity and fixed-income managers. Allocations to private equity now range from roughly 3% for health insurance general accounts to more than 30% for endowments, with an estimated 2.1 trillion dollars in private equity representing about one-tenth of the 20.4 trillion dollar institutional asset base.
Recent volatility, funding pressures, and a tougher exit backdrop have made illiquidity the dominant concern for 59% of institutional asset owners surveyed, followed by fees (53%) and the risk that managers cannot exit investments profitably (28%). Against this backdrop, secondary market transactions and evergreen funds have moved from niche tools to core liquidity levers.
Secondary volumes have reached record levels, with tighter discounts allowing sellers to raise cash or rebalance with smaller pricing concessions, while buyers can construct portfolios with potentially stronger risk-adjusted profiles. At the same time, private evergreen funds offer investors the ability to tactically adjust allocations and improve overall liquidity without abandoning private markets altogether.
“Secondary market transactions, traditionally a tool for investors in distress, have become more mainstream in the institutional space,” said 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.”