How PE Built New Rules for Liquidity

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

🚪 WHO WE ARE We help qualified investors access the same private equity and VC funds that have traditionally been reserved for the ultra-wealthy and institutions. No million-dollar minimums or confusing paperwork. Why should only billionaires get the good stuff?

🧠 THE BIG IDEA

The Distribution Milestone PE Has Been Waiting For

Private equity hit a milestone in 2024: for the first time since 2015, sponsors returned more cash to investors than they called. It signals how the industry has adapted to navigate longer market cycles.

Rather than waiting for IPO and M&A markets to fully reopen, PE firms have built pathways to deliver returns. GP-led secondaries, NAV financing, and partial exits have grown from niche solutions into standard practice.

The result shows PE's maturation in managing investor relationships when market timing doesn't align with fund lifecycles. For investors, understanding these liquidity mechanisms becomes important for evaluating manager capabilities.

📈 MARKET MOVERS

🎯 GTCR delivers $5B+ in distributions
The Chicago firm is returning over $5 billion to LPs this year through major exits including Worldpay, showcasing how top-tier managers are capitalizing on market opportunities. See the details

🛡️ Defense tech drives $4.5B exit
Motorola Solutions is acquiring Silvus Technologies from TJC in a deal highlighting how defense modernization creates value in dual-use technology assets. Read the analysis

🇯🇵 Japan's GPIF expands PE allocation
The world's largest pension fund committed $500M to Thoma Bravo, reflecting institutions' continued appetite for private equity despite market volatility. View the commitment

🌸 Gulf's first woman-led PE firm closes debut fund
Aliph Capital raised $200M for its inaugural fund despite challenging market conditions, targeting Gulf companies in healthcare, education, and consumer sectors with growth capital and digitalization strategies. Learn more

⚖️ Policy impact timeline extends
Permira's leadership noted that tariff effects may take years to materialize, giving firms time to adapt portfolio strategies and operations. Get the insights

🔍 DEEP DIVE

How PE Built New Pathways to Liquidity

The distribution turnaround reflects changes in how private equity manages investor capital. With 40% of PE assets now held for over four years, exit timelines no longer match what LPs expect.

Three innovations drive this evolution:

GP-Led Exits Take Center Stage: GP-led secondaries have grown from handling 24% of secondary volume in 2016 to over half today. These transactions let sponsors provide liquidity to investors while keeping control of their assets. They create flexibility when exit markets get choppy.

NAV Financing Goes Mainstream: What started as a financing tool has become a $100 billion market. Firms can now access capital secured by portfolio value. This enables follow-on investments and distributions without selling assets early.

Partial Realizations Become the Norm: Rather than all-or-nothing exits, sponsors increasingly monetize portions of investments. This preserves upside while meeting distribution needs. It works better when markets get unpredictable.

The market validates these approaches. Most LPs now view GP-led secondaries favorably. They recognize these tools provide flexibility both sponsors and investors need.

🧰 TACTICAL TAKEAWAYS

• Prioritize Distribution Capabilities During Due Diligence. LPs now rank DPI as 2.5 times more critical than three years ago. Focus on managers with proven track records in alternative liquidity mechanisms like GP-led secondaries and NAV financing, not just traditional exit expertise.

• Evaluate Managers' Liquidity Toolkit Sophistication. With 40% of PE assets held over four years, sponsors need multiple pathways to generate returns. Assess whether prospective managers can deploy continuation funds, partial exits, and creative structures beyond waiting for optimal M&A timing.

• Monitor Portfolio Company Aging in Existing Commitments. Over 28,000 PE-backed companies are currently held by sponsors, creating pressure for creative exits. Review your current managers' aging portfolios and their plans for generating liquidity from extended hold periods.

🗳️ COMMUNITY POLL

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 🏛️ Trump considers order to open US retirement plans to private equity - The administration is debating an executive order that could open the nearly $9tn US retirement market to private capital groups, potentially attracting hundreds of billions in new industry assets from 401k plans.

• 🧵 The Red Thread – Private Markets - UBS's latest insights into private markets, "The Red Thread," analyze the sector's challenges and opportunities, particularly the impact of tariff uncertainty and the need to manage risk effectively.

• 🦄 The US government helped create 24% of unicorns, study finds - Commonweal Ventures analysis shows nearly 1 in 4 venture-backed US unicorns received government funding or support, with federal investment averaging $100 billion annually into startups from 2003-2023, highlighting opportunities in defense tech and government modernization.

👋 WANT IN?

In these turbulent times, understanding the nuances of private market investments is more crucial than ever. Schedule a discovery call with OneFund further discuss private equity and the current market.

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The OneFund Team

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