Private equity firms are facing a mounting exit problem as holding periods extend and distributions to limited partners have remained below 15% of net asset value for four consecutive years, according to Bain & Co.'s 2026 Global Private Equity Report. This prolonged drought has pushed LPs to seek liquidity through secondary market sales, with pricing remaining strong at 90% plus of face value.

LP-led transactions dominated secondary activity last year, totaling $120 billion of the $226 billion in total secondary deal volume reported by Evercore. The extended holding periods have fundamentally altered how investors view performance metrics, with distributions to paid-in capital (DPI) becoming the primary measure of returns rather than internal rate of return (IRR). StepStone Group partner Matthew Roche noted that this shift reflects the current reality of private equity investing.

Secondary buyers are developing creative structures to bridge the gap between current valuations and expected future distributions. These solutions include deferred payment arrangements where buyers might pay 50 cents today and 50 cents when distributions resume, helping LPs maintain capital recycling capabilities while waiting for the exit cycle to normalize.