Secondaries funds are now capping software stakes in LP‑led transactions at 15‑20%, a sharp drop from the 40% levels some buyers tolerated previously, participants heard at the PEI Group’s Women in Private Markets Summit North America. The shift coincides with tighter credit that raises secondary financing costs.

Buyers cite ongoing disruption in the cloud software sector and heightened valuation uncertainty as reasons to shrink exposure. Market sources say the pullback followed the broad equity sell‑off that began early this year, prompting firms to preserve liquidity and avoid over‑concentration in a volatile niche. Heightened competition for high‑growth portfolios pushes investors toward broader diversification instead of deep bets on a single vertical.

The tighter stance means fewer dollars flow into SaaS secondary deals, compressing price multiples and forcing sellers to accept lower premiums. LPs with existing software holdings may need to rebalance portfolios, while managers eyeing new purchases must budget for reduced stakes. Software exposure is now a guarded metric in deal negotiations. Investors will likely scrutinize covenant structures more closely to mitigate downside risk.