Structured Fund Stakes Gain Momentum as Private Equity Investors Seek Liquidity
Private equity investors are increasingly adopting structured, debt-like financing arrangements to access liquidity as distributions from buyout funds remain constrained and traditional exit activity continues to lag.
The value of alternative structured transactions tied to private equity fund interests climbed to approximately $9 billion in 2025, up from $6 billion in 2024, according to data cited by investment bank Jefferies. Market participants expect activity to remain strong as investors seek flexible financing options without permanently selling fund stakes at discounted prices.
The transactions, commonly known as preferred equity deals, have become a growing segment of the secondary private equity market. Rather than selling ownership outright, investors receive an upfront cash payment while the financing provider collects future distributions from the underlying funds until the original advance and an agreed return have been repaid. Investors typically retain exposure to any remaining upside after those obligations are satisfied.
Industry advisers say the trend reflects prolonged holding periods for private companies and a sustained decline in capital returned to limited partners, driven by muted mergers and acquisitions activity, fewer initial public offerings, and slower portfolio company exits.
The evolving market has also attracted a broader range of buyers. In addition to dedicated secondary investors, alternative credit managers and preferred equity specialists are increasingly participating in these transactions, expanding available capital for fund investors seeking liquidity.
Advisers note that family offices, insurers, and other mid-sized institutional investors have been among the most active users of structured secondary solutions. Many are using the proceeds to meet capital commitments or reinvest in new private equity funds rather than reducing exposure to the asset class.
Recent transactions underscore the market’s expansion. In one notable example, a structured secondaries team affiliated with Carlyle AlpInvest acquired approximately $600 million of private equity fund interests from Federated Hermes that were originally managed on behalf of the BT Pension Scheme, highlighting growing institutional acceptance of preferred equity financing.
Market participants also report rising interest in secondary sales of co-investments—direct stakes in portfolio companies held alongside private equity funds—as investors search for additional liquidity solutions in an environment of prolonged capital lockups.
Analysts expect demand for structured liquidity products to remain elevated as private equity firms continue holding assets longer and distributions recover only gradually.
