Private equity firms are increasingly employing a fundraising tactic that makes it harder for major investors like pensions to exit their funds early, irritating clients who want cash on short notice.
Buyout shops, under pressure from high rates and a shaky economy, have been asking for commitments to future funds as a condition of allowing existing stakes to change hands, according to investors. The trend is slowing down so-called secondaries, or the buying and selling of private equity fund stakes before they mature — an option gaining importance as President Donald Trump’s tariffs disrupt markets.
Major asset managers including Carlyle Group Inc. have sought the commitments in exchange for letting investors cash out, according to people familiar with the matter. But the tactic is more prominent among smaller managers, said the people, who asked not to be named because the negotiations are private. Typically the buyer of the stake is asked to provide the future investment pledge, known as a staple.
The New York City Employees’ Retirement System in recent months shopped a multibillion-dollar portfolio that included a large position in Palladium Equity Partners, for example. Palladium, seeking a long-term investor, asked would-be buyers to pledge money to its new fund in exchange for letting the NYCERS position change hands, according to people familiar with the matter. The secondaries arm at Blackstone Inc., which had backed Palladium before, agreed and bought the stake.
Private equity firms have the right to approve the sales of stakes to specific buyers, said Jeff Keay, chair of the secondaries investment committee at HarbourVest Partners.
“Some choose to be more aggressive than others in potentially withholding their consent,” he said, without specifying any firms.
Carlyle, NYCERS, Palladium and Blackstone declined to comment.
More than $500 billion globally is dedicated to secondaries across private markets, according to Pitchbook. The market allows initial investors in funds a way to access their cash ahead of schedule. Even before global markets began selling off, a dropoff in dealmaking has been keeping capital tied up in illiquid funds for longer.
Managers refusing to sign off on trades unless buyers invest in their new funds underscores the difficulties facing private equity firms. Globally, buyout funds gathered $508 billion in 2024, down from $605 billion the year before and the lowest since 2020. It took them on average of nearly 17 months to close a fund last year, according to data from Pitchbook. That’s the second longest since 2010.
“A large number of firms who are fundraising are making these asks,” said Imogen Richards, a partner at Pantheon. Her firm has pushed back on some of the requests recently, she said, without providing specific instances.
The dynamic shows how private equity firms are trying to regain some control after investors took advantage of one of the toughest fundraising environments in years. Sovereign wealth funds and state pension providers have been demanding fee discounts, more co-investment opportunities and the release of their old capital before pledging new money. Mandating staples is one way for buyout firms to push back.
“With some GPs taking two years or more to raise funds, asking for staples, even if only a fraction of the size of what is being divested, can be very valuable,” Keay said.
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