Exit Bottleneck Drives Record PE Self-Sales as Liquidity Routes Blocked | Weekly Pulse

Must Know: Private Equity Model Under Strain as Exit Crisis Deepens

• Bottom Line: Private equity firms are increasingly selling companies back to themselves through continuation vehicles as traditional exit routes remain blocked, with record $41bn in self-sales in H1 2025.

• Why It Matters: Private equity groups find themselves sitting on $3tn worth of assets that they are unable to get out of, either by selling to another company or by listing them. In the first half of this year, private equity firms sold companies they owned back to themselves at a record-setting pace, providing a way out of (or back into, whichever you prefer) some $41bn of investments in the first six months of 2025, according to investment bank Jefferies.

• Big Picture: Market constipation has set in since the end of the zero-ish interest rates era. The dwindling band of pesky stockpicking fund managers who really underpin the listing process are quite demanding, and often unwilling to pay the price for shares that the companies themselves, or their private equity backers, think they are worth.

Trends to Watch

• 🤖 Blockchain-Private Equity Convergence - New York-based Inversion Labs plans to acquire low-margin companies, outfit them with blockchain to juice efficiency and then reap the profits that follow. Founded at the beginning of this year, the company has raised a $26.5 million seed round at a $100 million valuation.

• 📈 Retail Private Markets Access - Franklin Templeton has embraced alternative investments even as Johnson has warned of the potential for a "frothy situation" in private credit as groups raise record sums from wealthy individuals. Despite the potential for risks, Johnson is still bullish about the opportunity for individuals to invest in alternatives.

• 🔄 Secondary Market Innovation - iCapital is adding a marketplace to its platform that will let investors buy and sell stakes in private funds, tapping into growing demand for early exits from illiquid bets. Secondary transaction volume for broader private markets hit a record $103 billion in the first half of 2025.

• ⚖️ Regulatory Scrutiny Intensification - California lawmakers want the state to demand more information from private-equity and hedge-fund investors seeking to buy in-state medical providers. The measure "ensures that Californians have a watchdog when it comes to the billions of dollars of private-equity transactions in California's healthcare system."

• 🏦 Bank-Private Credit Competition - Banks and direct lenders have tussled all year to snag debt refinancings from one another. Just one repayment, a $3.3 billion loan to Kaseya taken out by the BSL market, eliminated $1.9 billion from BDC portfolios.

• 📊 Benchmarking Standardization - Kroll and StepStone Group launched the Kroll StepStone Private Credit Benchmarks, built using loan-level data and information from more than 15,000 deals. The Benchmarks deliver more timely, reliable and actionable insights, on an anonymized basis.

  
  

Fundraising Focus: Capital Formation

• 🎯 Peak Rock Capital Fund IV closed at its $2.5 billion fundraising limit, surpassing its $2 billion target with commitments from major pension systems including CalSTRS and Texas ERS.

• 🏦 Hargreaves Lansdown partnered with Schroders Capital to offer retail investors access to private markets through self-invested personal pensions with minimum investments of just £10,000.

• 📊 Secondary market volume hit a record $103 billion in the first half of 2025, driven by a wave of new market entrants according to Jefferies.

• 🔄 Credit secondaries are set to exceed $18 billion this year, up from $11 billion in 2024 and around $6 billion in 2023, according to Evercore data.

• 💼 iCapital is adding a marketplace to its platform through an investment in Tangible Markets, enabling investors to buy and sell private fund stakes via real-time auctions.

• 🏗️ Sagard Holdings doubled its assets under management to $32 billion over the past two years, now expanding into US distribution through partnership with Robert W. Baird & Co.

Industry Insights: Strategy & Outlook

📉 Pension Fund Retreat from Private Credit

US public pension funds are allocating less capital to private credit investments amid concern about looser underwriting standards and rising credit risks. A Financial Times analysis shows 70 major US public pension funds reported an 18 per cent decline in allocation to private credit in the first six months of 2025 from a year earlier.

🧟 Zombie Fund Predictions

A record number of private equity firms will turn into so-called zombie funds this year, as they struggle to reel in new investor cash. More than 18,000 private capital funds worldwide are in the process of soliciting investor cash, according to a Bain & Co. report. That translates into $3 of demand for every $1 of supply.

📊 Family Office Allocation Shifts

Some of the world's richest families are less exposed to private equity as they lean more heavily on public markets. The average allocation to public equities increased to 31% from 28%, while the average allocation to private equity dropped to 21% from 26%.

🔗 Technology Integration

WisdomTree Inc. launched its first tokenized fund that gives investors exposure to private credit, marking the latest attempt by Wall Street to connect fast-growing markets with blockchain technology. The tokenized vehicle has a minimum investment of $25 and allows for redemption within two days.

Market Spotlight: Regional Developments

🇬🇧 UK Exit Drought Continues

In the first half of 2025, exits were down 12 per cent from the same period last year, which themselves were down more than half from the year before that. The UK now has a backlog of more than 2,700 companies seeking a new home.

🇺🇸 401(k) Market Opens to Alternatives

CVC is developing products to tap into "really exciting" US retirement savings after Donald Trump's executive order last month opened up the $9tn market to alternative assets.

🇪🇺 European Credit Secondaries Growth

Credit secondary volume is set to exceed $18 billion this year, up from $11 billion last year and around $6 billion in 2023, according to data from Evercore.

🇨🇦 Canadian Alternative Assets Expansion

Robert W. Baird & Co. is buying a stake in Canadian alternative asset manager Sagard Holdings Inc., becoming its first US institutional shareholder in a deal that also includes distribution of Sagard funds. Sagard has doubled its assets under management over the past two years to $32 billion.