As liquidity concerns shift the dial for GPs and LPs in their assessment of private markets assets, Michael Aldridge, global head of LP Portfolio Analytics at Carta, shares his views with Funds Europe on the state of the secondaries market, the shifting demand trends being spotted, and differences between the US and Europe.
You recently noted that major US endowments like Harvard and Yale are increasingly using the secondaries market as a strategic “pressure valve” rather than an exception. What specific macroeconomic factors are driving these historically patient LPs to actively manage their liquidity right now?
Historically, large endowments have been able to take a very long-term view, but the current environment is testing that patience. Distributions have slowed materially, with cash not flowing back at the pace institutions are used to, while holding periods continue to extend. At the same time, exit markets remain uneven, making timelines far less predictable. Layer on top of that a more complex macro backdrop with higher interest rates, tighter financing conditions, and ongoing geopolitical volatility, and liquidity planning becomes far more acute. Many of these institutions are also facing external pressures, whether that’s funding uncertainty or increased scrutiny on capital deployment. In that context, secondaries are now being used as a proactive tool to manage liquidity, rebalance exposure and create flexibility, rather than waiting for traditional exits to materialise.
We are seeing US public pensions, such as the Oregon Public Employees Retirement System, lower their long-term private equity targets due to underperformance. Are we seeing similar trends in the Europe inc UK region?
We’re not seeing a wholesale pullback across Europe in the same way, but there is a clear shift in how allocations are being managed. European and UK pensions remain committed to private markets as a source of diversification and long-term returns, but they are becoming more selective and more focused on portfolio construction. What’s changed is the level of scrutiny. Slower distributions, longer hold periods and greater return dispersion are forcing investors to look more closely at where performance is coming from. Rather than broad allocation cuts, the trend in Europe is more about refining exposure, adjusting pacing, rebalancing portfolios and being more deliberate about manager and strategy selection. That’s also driving increased use of tools like secondaries as a way to actively manage portfolios in a more complex and less predictable environment.
Beyond simply meeting near-term cash needs, how are LPs strategically using secondaries to reshape their exposure?
Secondaries are increasingly being used as a precision tool for portfolio construction and not just a source of liquidity. LPs are using them to actively reshape exposure across regions, vintages and strategies, rather than making blunt allocation changes. For example, they can reduce concentration risk in specific sectors, trim exposure to older vintages with longer holding periods, or rebalance portfolios that have drifted due to slower exits. At the same time, they can redeploy capital into newer opportunities or more attractive pricing environments. What’s important is that this is being done proactively. Rather than being forced sellers, LPs are using secondaries to stay in control of their portfolios, fine-tune exposure, manage risk and position themselves for the next cycle, but only where they have the data and transparency to do so with confidence.
You pointed out that assessing a secondary transaction requires turnaround speed and requires deep portfolio insights rapidly. How quickly is ‘fast turnaround’ and what are the biggest operational hurdles LPs face when trying to value these assets at such high speeds?
In practice, ‘fast turnaround’ often means moving from initial data receipt to a pricing view in a matter of days, not weeks. In competitive processes, timelines are compressed, and LPs don’t have the luxury of lengthy analysis cycles. The challenge is that the underlying data isn’t built for speed. LPs are still receiving hundreds of documents in inconsistent formats, often as PDFs, with fragmented and unstructured information across managers. Pulling that together into a coherent, comparable view of performance, exposure and valuation assumptions is incredibly time-consuming. That creates a real operational bottleneck. Without a consolidated, standardised dataset, LPs are forced to rely on manual processes at exactly the moment when speed and accuracy are most critical. The risk is either slowing down and missing opportunities, or moving quickly without full visibility, which can lead to mispricing.
You noted that LPs need robust, defensible data to transact with confidence. How does your platform utilise artificial intelligence and machine learning to turn unstructured GP documents into the clean data required for accurate valuations?
The core challenge in private markets is that critical data is buried in unstructured documents across a wide range of formats. Our platform uses proprietary agentic AI and machine learning to systematically extract, standardise and normalise that information at scale. We ingest thousands of GP reports, capital account statements and portfolio company updates, and use trained models to identify and pull out key data, such as company-level financials, valuations, cash flows and exposure metrics. From there, the data is structured into a consistent format, allowing LPs to analyse their portfolios on a like-for-like basis across managers and strategies. That creates a single, consolidated view of exposure and performance, which is critical when you need to move quickly and make defensible pricing decisions in the secondary market. Ultimately, it’s about replacing fragmented, manual workflows with a system that delivers accuracy, consistency and speed.
Historically, LPs received hundreds of fund performance documents in cumbersome PDF formats. How critical is underlying asset transparency – such as revenue, Ebitda, and net debt – when an LP is trying to determine if a secondary portfolio is worth 75 cents on the dollar?
It’s absolutely critical. Headline fund-level metrics only tell part of the story, especially in a market where valuations are under greater scrutiny and exit timing is uncertain. To assess whether a portfolio is worth 75 cents on the dollar, LPs need to understand what’s actually sitting underneath those valuations. That means looking through to company-level fundamentals – revenue growth, Ebitda trends, leverage and how those businesses are performing operationally. Without that level of transparency, you’re effectively pricing in the dark. Two portfolios with similar headline valuations can have very different risk profiles depending on the quality and performance of the underlying assets. This is why consistent, reliable and granular data has become so important. It allows LPs to move beyond surface-level pricing and make informed decisions about whether to hold, sell or rebalance, particularly in a secondary market where pricing discipline is everything.
