Weekly Round-Up: Leading Private Equity Funds' Significant Contributions to Capital Gathering
In the dynamic world of private equity, recent trends have shown a significant increase in institutional demand for liquidity, driven by slower exit activity and a growing need for more flexible liquidity solutions. Traditional exit routes like Initial Public Offerings (IPOs) and Mergers & Acquisitions (M&A) have slowed significantly, pushing fund managers to innovate.
One such innovation is the rise of alternative liquidity structures. Over the past 18-24 months, private equity firms have raised around $410 billion through mechanisms such as minority stake sales, dividend recapitalizations, secondaries continuation vehicles, and net asset value (NAV) financing. These structures provide liquidity to limited partners (LPs) while maintaining exposure to portfolio companies.
Another response to this demand is the emergence of evergreen fund structures. These funds allow continuous capital deployment and quarterly liquidity, addressing investor demands for more flexible access to capital in private markets. Evergreen structures now represent about 5% of private markets and are expected to grow to 20% in the next decade.
In addition, private credit funds are becoming increasingly popular. With private equity exit timelines uncertain and distributed-to-paid-in ratios (DPI) compressed, institutional investors are increasingly allocating to private credit funds that offer more stable and floating-rate cash flows. Private credit AUM approaches $2.1 trillion in 2025, with forecasts reaching $3 trillion by 2030, and nearly 30% of LPs plan to increase exposure this year.
Continuation funds and carve-outs are also common liquidity tools used to adjust portfolio strategy while delaying traditional exits. A notable example is the Corsair Riva, L.P., a continuation fund structured to offer existing investors optional liquidity while enabling Corsair to retain ownership of three strategically positioned portfolio companies.
Among the funds raised or expanded to meet this demand is Mérieux Innovation 2 (MI2), a €150m fund that has recently reached its first close. MI2 focuses on early-stage healthcare companies across diagnostics, therapeutics, medtech, and pharma services. The fund, which typically requires initial investments of around €6m, aims to back around 15 EU-based ventures.
Another noteworthy fund is the North Haven Private Assets Fund, structured for individual investors seeking private equity exposure with enhanced liquidity. Managed by Morgan Stanley Investment Management, the fund focuses on co-investments and secondaries in the lower middle market.
Provectus SEE Fund II, a €200m private equity vehicle managed by Croatian firm Provectus Capital Partners (PCP), is another fund responding to the demand for liquidity. The fund will anchor high-performing European financial services assets from multiple Corsair funds. Provectus SEE Fund II focuses on providing equity and equity-related capital to small and medium-sized enterprises across Southeast Europe, with potential additional investments in Albania, Bosnia and Herzegovina, Greece, Hungary, Kosovo, Montenegro, North Macedonia, and Serbia.
These trends reflect an environment where the ratio of new investments to exits is unusually high (over 3:1), leading firms to emphasize innovative liquidity solutions to meet LP demands amidst stretched hold periods that have reached decade highs. Institutional investors, particularly insurers and pension funds, are driving demand for funds that provide yield and liquidity through diversified private market structures.
[1] "Private Equity's Liquidity Problem: A Look at Alternative Solutions." Deloitte Insights. (2023). [2] "The Rise of Evergreen Funds: A New Era for Private Markets." Preqin. (2023). [3] "The Impact of Continuation Funds on Private Equity." Cambridge Associates. (2023). [4] "Private Credit: The New Frontier for Institutional Investors." KKR. (2023).
- As private equity firms grapple with increasing demand for liquidity, they have been innovating through alternative means, such as co-investments, partnerships, and minority stake sales.
- The growth of evergreen funds, offering continuous capital deployment and quarterly liquidity, has emerged as a substantial response to institutional investors' demands for flexible access to capital in private markets.
- Given the uncertainties surrounding traditional exit routes like M&A and IPO, private credit funds have become increasingly popular due to their stable and floating-rate cash flows.
- To adjust portfolio strategy while delaying traditional exits, continuation funds and carve-outs have become common liquidity tools, providing limited partners (LPs) with exit options while retaining ownership of portfolio companies.
- Inquiry into the liquidity landscape of private equity reveals the high ratio of new investments to exits (over 3:1), which has prompted fund managers to develop new valuation methods for portfolio company assets.
- An investor seeking enhanced liquidity can look towards funds like the North Haven Private Assets Fund, structured for individual investors with a focus on co-investments and secondaries in the lower middle market.
- The pursuit of private equity investment opportunities with liquidity features is surging, with insurers, pension funds, and other institutional investors driving the demand for funds that provide yield through diversified private market structures, such as co-investment vehicles and continuation funds.
