Over the past two weeks we’ve touched on the distribution dilemma in private equity, and most recently on the perspectives and tactics used by GPs. This week, we dive deeper into the LPs perspective and how allocators are managing private equity programs in the current environment. To quantify the issues: LPs observed a 9.5% distribution rate in 2023, well below the 2015-2019 average of 23.6% (per Private Equity International and MSCI). This trend poses a host of challenges for LPs who rely heavily on distributions.

Whether it’s meeting financial obligations of beneficiaries, funding new investments or balancing portfolio allocations, LPs must rethink their cash flow and liquidity management initiatives. Today’s dearth of realizations has LPs increasingly turning to the secondaries market as a strategic liquidity tool. This dynamic is driving LP-driven secondaries to ~$83 billion of volume in 2024, up from ~$25 billion in 2020 (per Jefferies.)