When private-market assets become difficult to exit, the instinctive response is often to give them more time. Extend the fund life, wait for markets to improve and avoid crystallizing a disappointing return.
But does giving a fund more time actually create more value?
Private markets have expanded dramatically over the past decade, but the pool of aging funds is growing even faster. Kroll’s analysis puts the global private-markets fund universe at approximately $18.5 trillion, with around $4.3 trillion sitting in funds more than eight years old. Behind that is a further $7.2 trillion in the five-to-eight-year category.
The challenge is particularly relevant for investments made around the market peak. Median buyout EV/EBITDA multiples reached approximately 12.7x in 2021, compared with around 9.5x in 2024. For assets acquired at those higher multiples, achieving an attractive exit today requires significant underlying business growth to compensate for that compression.
Holding on and waiting for a better environment can therefore look attractive. But time itself does not create value.
Our analysis of historic fund performance indicates that returns tend to plateau as funds mature and can decline as they move beyond their expected lives – our analysis indicates that, on average, nothing good tends to happen after eight years. There comes a point when waiting for a better exit may cease to be an investment strategy.
There is an additional complication: incentives can begin to diverge.
Once a typical fund reaches the end of its term, management fees may reduce or disappear. The GP can be left responsible for managing difficult, illiquid assets without the same economic incentive to commit people and resources to them. LPs, meanwhile, remain unable to access or redeploy their capital.
The industry has developed a growing range of solutions. Secondaries, continuation vehicles and fund finance all provide important sources of liquidity. But the scale of these solutions is materially insufficient to address the issue of the trillions of dollars already sitting in aging funds and the much larger cohort approaching that point.
We are therefore seeing LPs become more proactive. That includes considering managed wind-downs, replacement GPs, liquidating structures and other solutions that historically might have been considered only in exceptional circumstances.
It also raises a more fundamental question about fund structure. There has been discussion about whether longer fund terms, potentially 15 or even 20 years, could solve some of the industry’s liquidity challenges. For certain assets and strategies, they may make sense. But simply extending the clock cannot substitute for creating value.
Private markets do not just have an aging problem. They have a decision to make about when patience stops being rewarded.
With $7.2 trillion of funds already moving through the five-to-eight-year window, investors should be asking that question now, not just when those funds reach the end of their lives.
