NBK Wealth Thought Leadership
KUWAIT: Private equity has evolved from a niche institutional strategy into a core allocation for most investors. Over the past two decades, attractive returns, diversification benefits and access to operational value creation beyond public markets have driven sustained investor demand. Post the Global Financial Crisis, low-interest rates and strong equity market performance accelerated the growth of Private Equity and as of 2025, global private equity assets under management reached approximately $9.8 trillion.
Private equity liquidity model
Unlike public equities, private equity cash flows depend not on trading activity but on exit events such as initial public offerings (IPOs), strategic sales, or sponsor-to-sponsor transactions. Historically, stable exit markets enabled funds to distribute capital while simultaneously raising successor vehicles, creating a self-reinforcing cycle of capital that supported industry growth.
Private equity liquidity shock
The private equity industry has historically distributed 21 percent of AUM annually on average. This dynamic changed materially in 2022. Rapid global interest rate increases compressed valuation multiples and raised financing costs and market volatility. This resulted in widening valuation gap between buyers and sellers and exit activity declined sharply. Industry distributions fell to approximately 10 percent of AUM in 2023, activity has started to recover but remains below historical norms.
Implications – need for liquidity
Due to the reduced distributions, investors received less capital than expected, limiting their ability to recommit to new funds. Combined with ongoing capital calls many investors became over allocated to the asset class. This has contributed to slower fundraising activity and more selective allocation decisions among investors. Because the private equity model depends on continuous capital recycling, weaker distribution environments create structural pressure on both investors and fund managers to improve portfolio flexibility and restore cash flow generation.
Private equity secondaries
Against this backdrop, the private equity secondaries market has emerged as a key mechanism supporting liquidity within the asset class. Secondary transactions allow investors to transfer existing fund interests or company exposures without requiring underlying exits. Institutional investors utilize secondaries to rebalance allocations, while fund managers employ continuation vehicles to provide liquidity options to investors and extend ownership of high-performing assets in a slower exit environment. For buyers, secondaries offer access to more mature assets with greater cash flow visibility and shorter duration risk compared with traditional primary market commitments. As private markets adjust to a new distribution environment, secondaries have evolved as a liquidity solution and an investment strategy positioned to benefit from the private equity market’s ongoing transition.
New private equity liquidity regime
The recent slowdown in private equity distributions may represent more than a cyclical interruption and the industry may be transitioning toward a new liquidity regime shaped by longer holding periods and greater reliance on alternative exit pathways.
Within this evolving landscape, secondary markets, continuation vehicles and alternative realization strategies are likely to play a more permanent role in maintaining capital mobility across private equity portfolios. The industry’s “liquidity moment” therefore reflects not only a response to recent market conditions, but a broader maturation of private markets. The shift in private equity liquidity dynamics carries important implications for private wealth investors. The recent slowdown in distributions highlights that liquidity management is becoming an increasingly central consideration in private market portfolio construction.
For high-net-worth investors and family offices, pacing commitments across vintages, strategies and liquidity profiles is increasingly important as realization timelines have become less predictable. In response, semi-liquid private market structures have gained traction within the wealth segment. These structures aim to balance long-term private market exposure with periodic subscription and redemption mechanisms, offering greater flexibility compared with traditional closed-end funds. For private wealth portfolios, success increasingly depends not only on manager selection and return expectations, but also on liquidity planning aligned with investors’ broader financial objectives.
Key Takeaways
• Private equity has matured into a core component of diversified portfolios, with AUM of ~$9.8 trillion as of 2025.
• Liquidity dynamics have shifted. Distributions have fallen sharply from historical averages, driven by reduced exit activity.
• Slower Distributions combined with ongoing capital calls have resulted in over allocations, highlighting investors’ need for liquidity.
• Secondaries and continuation vehicles are now structural tools for investors to manage liquidity.
• Semi-liquid structures expand wealth access complementing secondaries while balancing long-term exposure with portfolio cash flow needs.
• Strategic portfolio planning is critical and in this “liquidity moment”, success depends on manager selection as well as liquidity planning.