Private markets have been like the kid in investing for years. Private equity, venture capital, private credit… all those fancy asset classes have exploded, soaring past a mind-blowing $100 trillion. Pension funds, hedge funds, even regular investors have thrown their cash into the mix, believing they have this magic formula for better returns and less drama from public markets.
But let me tell you something. What if this stability is just a big lie? What if this whole "private markets are stable" thing is just a nice story investors tell themselves?
See, the difference is huge. Private markets don't work like the public ones. Where you buy Apple stock and you can sell it in seconds. But when you invest in a private equity fund your money is going to be locked up for like a decade or more . That’s all good—until you need to cash out and find out that nobody’s buying.
And that's exactly what's happening right now.
The Illusion of Liquidity: Why Private Markets Are Built on Thin Ice
Private markets always depended on this simple thing: investors are going to be patient. If you can't sell an asset today, no worries it's going to be worth even more in a few years— that’s the game. That's why private equity firms can hold onto companies for ages. Why venture capitalists wait for an IPO and why private credit lenders can give long-term loans without freaking out.
But what if that patience runs dry?
Where do these private market investors even get there money back?
Private credit funds lend for the long haul. All of it works… until people need their money back now.
So how do investors usually cash out? The cash out through these three ways :
1. Initial Public Offering (IPOs) – Companies go public, letting investors sell shares.
2. Mergers an Acquisitions (M&A) – A bigger company buys out the private investment.
3 Secondary Sales – Investors sell their stakes to other peeps in private deals.
Right now all three of these exit routes are shutting down faster than you can blink.
IPOs is barely happening. They dropped like 60% in 2023 and nobody is seeing a recovery. Companies stay in private longer, leaving investors stuck like glue.
M&A is slowing down. Higher interest rates is making corporate buyouts more expensive, so fewer deals is happening.
Secondary sales is Stuck. Too many sellers and not enough buyers. Those who are buying want dirt-cheap prices.
The result is $3.6 trillion pile of unsold private assets just sitting there, frozen.
Preqin says, Investors who expected liquidity are now staring at a market that won’t let them exit.
Warning Signs: The Cracks Are Already Showing
This isn't just some theory. Liquidity stress is playing out right now and its getting real.
1. Blackstone's BREIT: When Investors Can't Cash Out
Blackstone's $66 billion real estate trust (BREIT) was once this total goldmine for rich investors. But , when too many people tried to withdraw cash in late 2023, Blackstone put a cap on redemptions for 12 months straight. Investors who wanted there money back they had to wait.
Imagine putting your money into an investment and then finding out you can’t take it back when you need it. That’s a big problem.
2. Pension Funds and Endowments: Overexposed an Trapped
Institutions—big pension funds, Harvard’s endowment, university investments—they all love private markets. But they’ve gone in too deep.
Harvard's Endowment has 37% of its assets in private equity more than they can easly sell.
CalPERS (California’s public pension fund) is facing liquidity problems.
UK pension funds got forced to sell off their assets in 2022 when bond yields went crazy, showing how fragile these investments can be.
3. Venture Capitals Funding Freeze
Startups used to have endless cash flowing in. But now struggling to raise money. Venture capital investment dropped like a rock to 50% in 2023 and valuations has been collapsing.
Instacart went public at a fraction of its original valuation.
Stripe cut its valuation from $95 billion to $50 billion, desperately trying to raise capital.
Even SoftBank, this venture capital giant, posted record losses as its private market bets went south.
When the funding stops, startups die. And that’s exactly what we’re seeing.
The Bond Market Is Screaming: A Liquidity Crunch Is Coming
Stock market headlines are everywhere but the real financial check on private markets comes from bonds.
Why is this so? It's because private markets are so dependent on cheap debt. Private equity firms use leverage to buy companies, startups rely on loans to grow and private credit funds thrive when borrowing is easy.
Now that's changing.
Because Rising Interest Rates = Higher Borrowing Costs
The U.S. Federal Reserve has been raising rates excessively in 2023-24, pushing borrowing costs to levels nobody has seen in decades.
Corporate debt yields are going up and it's making leveraged buyouts (LBOs) way more expensive.
Refinancing risk is growing—companies that took on cheap debt in the 2010s are now facing a massive wall of maturities at much higher interest rates.
But this Is Just the Beginning.
Mark Zandi, Chief Economist at Moody’s, says:
"Private markets were built on a world of zero interest rates. That world is gone. The liquidity crunch is just beginning."
Final Thoughts: The Liquidity Mirage Is Fading
The $100 trillion private market boom isn't necessarily over but the days of easy liquidity, sky-high valuations and infinite patience they are toast.
Investors have to adapt. Those who ignore liquidity risks might find themselves trapped in a market where:
• Selling is impossible
• Prices are totally arbitrary
• Exit doors are locked tighter than a drum
In finance, what looks stable can collapse overnight. The private market illusion is fading-its just a matter of who notices first.