Investment managers are confident that private markets will continue to outperform public markets, but they believe liquidity constraints will dictate their strategy this year, and that capital is being deployed with greater selectivity, discipline, and urgency around liquidity, a report by Adams Street Partners has found.
The report, The Great Recalibration: Liquidity, Discipline, and a More Selective Opportunity Set, found 84 per cent of respondents expect private markets to outperform public markets over the long term, yet 90 per cent believe liquidity pressures will influence their strategy in 2026, with two thirds anticipating a “high or moderate impact”.
“Private markets are no longer in an era of easy liquidity or multiple expansion,” said Jeffrey Diehl, managing partner and head of investments at Adams Street.
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“This is a more demanding environment, one that is poised to reward operational excellence, sector specialisation, and disciplined underwriting. The investors and managers who succeed are viewed as those who treat liquidity as a strategy, not an assumption.”
The report also found that as distributions lag historical norms, LPs are increasingly turning to secondary market options including continuation vehicles, to help manage cash flows and rebalance portfolios.
Amid lower liquidity, fundraising has softened, and fewer LPs are increasing commitments to existing managers – down to 53 per cent, from 67 per cent previously, while appetite for adding new managers has fallen to a five-year low.
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In response, investors indicated they are concentrating capital with managers demonstrating repeatable alpha, deep sector expertise, and alignment of incentives.
