After a post-pandemic bacchanal of deal activity lasting into 2021, private-market participants are still nursing a hangover. Assets acquired at premium valuations at the market peak have been creating headaches for general partners (GPs), who must decide whether to hold out for buyers at current valuations or stomach write-downs for a shot at quick liquidity. Net asset value (NAV) is increasingly bottled up in old funds that should otherwise be liquidating. For now, it seems only top-shelf assets are finding buyers, while assets with weaker fundamentals are still on ice.
In this blog post, we take a sober look at how private-capital markets are adjusting to a world of depressed distributions, with no exits in sight. Limited partners (LPs) hoping for an outpouring of liquidity in 2025 may instead want to brace themselves for another dry year.
Recent vintages falling further behind
Private-capital distributions remain subdued, extending a slowdown that began in the wake of 2021’s exit boom. What once looked like a brief pause is increasingly feeling like a prolonged holding pattern posing a test of LPs’ patience.
This slowdown is especially apparent in the divergence in net-cash-flow paths between vintage cohorts. While cash flows for most historical vintages follow remarkably similar paths, recent vintages are drifting from the script. The traditional cadence of investment, ramp-up and harvest appears to be slipping out of rhythm.
In some cases, as with 2015-2017 vintages, this slowdown looks like mean reversion, dragging these vintages back down after a period of unusually strong liquidity — particularly in venture capital and buyout. In others, like with 2018-2020 vintages, the drop appears more acute, suggesting not just a return to historical norms but a deeper pullback in realizations.
Structural shifts may be reinforcing the deviations from long-run averages. Strategy evolution in areas like private credit, shifting exit dynamics in buyouts, and a valuation overhang in venture and real estate all suggest that today's market environment is markedly different from past cycles. Historical analogs are becoming less-reliable guides. But the message is clear: Recent vintages aren’t just behind the curve — they’re navigating a new course.
Net cash flows diverged among fund types and vintages
Water, water everywhere, nor any drop to drink
Across private-capital strategies, NAVs in old funds (those that have outlived the average liquidation age of their asset class) are at or near record levels, reaching USD 250 billion in Q4 2024, according to data from the MSCI Private Capital Universe. For LPs anticipating liquidity from their more mature private-equity commitments, some unwelcome news: This rise in late-life NAV is largely attributable to distribution rates, which have fallen to record lows, rather than strong growth.
Private-equity distribution rates remain depressed, with specific implications for funds that are over the hill. The dearth of distributions is bottling up assets that were once reliable candidates for exits. This has meant fund lives that drag on longer than expected, and LPs are increasingly looking to more-mature corners of their portfolios for liquidity.
The same can’t be said for private credit and private real estate. In the former, the self-liquidating nature of loans has stabilized distributions and kept NAVs in check through funds’ golden years. For the latter, write-downs kept a lid on valuations coming out of 2020, even as transaction activity remained depressed.
For private-equity distribution rates to revert to historical norms and old NAVs to run off, there are two options: one hopeful, one not. In the optimistic scenario, deal activity recovers and a wave of exits provides some much-needed liquidity; in the other, GPs come to believe that many of these long-held assets are overvalued and accept write-downs as the cost of winding down a fund, as we’ve seen in real estate.
NAV in old private-capital funds at or near record high
Distribution rates declined across private equity and real estate
Tempering cash-flow expectations
Across private equity and private real estate, distribution rates are near historic lows, and recent market volatility may put cash flows under further pressure when we start to see data for 2025.
Historically, prolonged downturns in public-equity markets have been reflected in private-capital distributions. The dot-com bust and 2008 global financial crisis both hit distributions hard; but in recent years, distributions have remained depressed despite a rebound in public equities.
For LPs counting on distributions to fund capital calls from other private commitments, this combination of public-equity sell-offs and falling distribution rates presents a challenge: If forced to sell liquid assets to meet capital calls, it’s likely to be when prices are down.
Private credit, in contrast, has continued to distribute more or less apace, benefiting from elevated interest rates passing through to lenders. This cash-flow diversification may become an increasingly important benefit of private-credit allocations. Not everything is rosy in private credit, however: GPs are increasingly writing down loan values as borrowers struggle under the weight of persistently high interest rates and newfound uncertainty around the economy’s trajectory.
Private-fund distributions tracked public-market returns
Valuation multiples in freefall may call for an EBITDA parachute
Between 2022 and 2024, buyout exits were sold at lower median-valuation multiples than assets still held in portfolios — an inversion from historical norms — despite exhibiting stronger margin growth and lower leverage. In contrast, held assets, carried at higher multiples, are grappling with contracting profitability and rising leverage, raising questions about valuations and their paths to exit.
These questions are amplified by the macro backdrop: Sticky inflation risk, higher-for-longer interest rates and growth uncertainty that could tip into stagflation. Held assets confront these macro headwinds with little balance-sheet cushion, given their narrowing since-entry margins and rising leverage.
Over the past decade, exited assets have consistently exhibited stronger median since-entry EBITDA margin growth and more contained median net-debt-to-EBITDA ratios than held assets, which reflects GPs’ tendency to prioritize exiting higher-performing assets. This selection trend proved especially relevant between 2022 and 2024, as exited assets’ robust fundamentals cushioned the impact of falling valuations. In 2025, with multiples under pressure and rising macro uncertainty, strong fundamentals may be the last line of defense against deeper erosion in exit proceeds and more strain on LPs.
Mind the valuation gap: Exit multiples under pressure
Is the party over?
Recent vintages of private-capital funds have plenty of ground to cover if they’re going to catch up with their older peers’ cash-flow patterns, and the surprising volatility in public markets of early 2025 is unlikely to help them close the gap. Returns for older private-equity funds have been flat, but more assets are accumulating in funds that are struggling to liquidate their holdings. GPs are preferentially exiting portfolio companies with strong fundamentals, leaving an unclear path for selling those remaining assets. LPs who were hoping for a rebound in transaction activity, and thus liquidity, in 2025 may need to adjust their plans.