Private Equity Seeks New Liquidity Solutions Amid Market Stall

In Brief:

José Luis González Pastor, Managing Director at Neuberger Berman covering private markets and co-investments, spoke on that Fund Shack podcast from the SuperReturn Conference in Berlin about the current state of private equity in 2025. González Pastor identifies a significant liquidity crunch gripping private markets, with deal-making activity stalling due to political and macroeconomic uncertainty despite initial optimism for 2025. He warns that traditional exit strategies remain blocked while revealing that his firm is pioneering innovative "midlife co-investment" solutions that operate largely outside public market tracking. His prediction that half of high-net-worth investors will hold evergreen private equity products within three years signals a fundamental shift in how private markets access wealth channels.

Big Picture Drivers:

• Market Uncertainty: Political and macroeconomic events have created a pause in deal-making activity despite early 2025 optimism

• Liquidity Innovation: Traditional solutions like secondaries are being supplemented by new approaches including continuation vehicles and midlife co-investments

• Wealth Channel Evolution: Private markets are rapidly expanding into high-net-worth investor segments through evergreen fund structures

• Data Blind Spots: Significant portions of private equity activity now occur outside traditional market tracking and reporting

Key Topics Covered:

• Secondaries Growth: Traditional secondary funds experiencing high demand alongside innovative continuation vehicles that allow GPs to hold assets longer

• Midlife Co-Investments: Neuberger Berman's proprietary approach to providing liquidity by purchasing partial stakes in portfolio companies mid-lifecycle

• Emerging Manager Strategy: Long-term relationship building with new managers who may become multi-billion dollar shops over time

• Evergreen Fund Expansion: User-friendly structures bringing private equity access to wealth management channels with monthly reporting and potential liquidity

Key Insights:

• Hidden Deal Flow: Neuberger Berman receives approximately 800 deals annually in unreported transactions, demonstrating significant market activity invisible to traditional data providers and creating tactical advantages for sophisticated players.

• Valuation Arbitrage: The firm's "midlife co-investment" strategy requires deep buyout expertise to negotiate individual asset valuations, positioning them as one of few players capable of providing capital solutions where assets remain within the same manager's fund family.

• Wealth Prediction: González Pastor forecasts that 50% of high-net-worth investors will hold evergreen private market products within three years, representing a massive structural shift in asset allocation among sophisticated investors.

• Geographic Divergence: Europe is showing more relative deal activity than the US due to greater regulatory certainty, though European managers face additional complexity from fragmented markets and heavier regulation compared to their American counterparts.

• Return Trade-offs: Evergreen funds sacrifice some illiquidity premium for user-friendly structures, but still deliver double-digit returns with low volatility, making them attractive alternatives to volatile public markets.

• Strategic Relationship Building: Early backing of emerging managers creates privileged access to oversubscribed funds years later, with emotional attachment and strategic value beyond pure risk-return considerations.

Memorable Quotes:

• "We receive approximately 800 deals per year and it has been growing over years... precisely because the IPO market is shut down because they're not able to sell their companies there are new opportunities for us" - González Pastor, explaining how market stress creates deal flow opportunities

• "We call them midlife because the original acquisition has already happened and now there is another event" - González Pastor, defining his firm's proprietary investment approach that operates outside traditional market categories

• "In three years in the wealth channel... I would say that half of them they will have an evergreen product in their portfolios" - González Pastor, making a bold prediction about private market adoption among high-net-worth investors

• "These are illiquid assets... they should not think that just by putting a structure you can make illiquid liquid" - González Pastor, cautioning about realistic expectations for evergreen fund liquidity features

• "If you accompany them if you support them on their very first fund... if they are very successful then in fund four fund five and six they're going to be oversubscribed but they will always remember that you were there the first day" - González Pastor, on the strategic value of early manager relationships

The Wrap:

This interview reveals a private equity industry in transition, where traditional metrics miss significant deal activity and innovative players are creating new liquidity solutions while positioning for a wealth management revolution. González Pastor's insights suggest that successful private equity firms are adapting by developing proprietary deal flow sources, building long-term GP relationships, and preparing for massive wealth channel expansion through evergreen structures that balance illiquidity premiums with investor accessibility.