LPs Pivot From Growth PE to Liquidity
Limited partners are reportedly cooling on traditional growth private equity, shifting focus to secondaries, credit, and infrastructure. The trend signals that institutional capital is prioritizing exits and cash flow over the "growth at any price" mindset.
The private equity fundraising slowdown is intensifying, with capital raised down 32.3% in the last year as of late 2025. This downturn is a direct consequence of a sluggish exit market, which has stretched average holding periods for portfolio companies to over five years and trapped more than $1 trillion in aging private equity funds. In response, LPs are turning to the secondary market for liquidity at an unprecedented rate. Transaction volumes in the secondary market surged 45% to a record $162 billion in 2024. Fundraising in the space is a standout success, with the top 50 firms raising over $522 billion between 2020 and 2024, led by Ardian, which raised $57.3 billion. Private credit is experiencing explosive growth, with assets under management reaching an estimated $3.5 trillion by the end of 2025, up from about $2 trillion in 2020. Projections estimate the market could swell to $5 trillion by 2029, as it offers the steady, floating-rate returns that provide protection in volatile interest rate environments. A recent survey of LPs overseeing a combined $2 trillion in assets revealed a clear shift in allocation plans. Nearly half (45%) of investors plan to increase their exposure to private credit, and 37% will boost allocations to secondaries, while the percentage of LPs planning to increase private equity commitments has declined. Infrastructure is also a major beneficiary of this capital rotation. Private infrastructure fundraising hit $134.3 billion in the first half of 2025 alone, the second-highest H1 total in the last six years. Investors are increasingly favoring higher-return "core-plus" and "value-add" strategies over traditional "core" assets.
