ARTIFICIAL INTELLIGENCE

“In an effort to satisfy their investors’ thirst for distributions, some [PE] fund managers are selling their crown jewels now, even if it means giving up potential returns.” – Pitchbook –

Private equity (PE) fund managers are increasingly selling high-value “crown jewel” assets prematurely to meet investor demands for cash distributions amid a prolonged liquidity crunch, potentially sacrificing long-term upside.^1,2

Context of the Quote

This observation from Pitchbook captures a core tension in the PE landscape as of late 2025, where general partners (GPs) face mounting pressure from limited partners (LPs) to return capital after years of subdued exits. Deal values reached $2.3 trillion by November 2025, on pace for the strongest year since 2021, yet distributions remain in a four-year drought extending into 2026.^1,2 GPs are resorting to tools like continuation vehicles (CVs)—which now account for at least 20% of distributions as LPs opt to sell rather than roll—secondaries sales, NAV lending, and portfolio stake sales to manufacture liquidity.^1,2,3 High-quality assets command premiums, skewing transaction stats upward, but GPs accept 11-20% discounts on long-held holdings to facilitate sales, especially for lower-quality or earlier investments retained post-2021.⁴ This “distribution drought” stems from a backlog of long-hold companies, valuation gaps, leverage constraints, and competition from patient capital like sovereign wealth funds and family offices, forcing even top assets out the door despite growth potential.^3,4,6,7

Dry powder stands at $880 billion (US PE) to over $2.5 trillion globally, but deployment favors creative structures like carve-outs, take-privates, and evergreens—projected to hold 20% of private market capital within a decade—over traditional buyouts.^1,3,6 Exits via IPOs and M&A are rebounding (volumes up 43% YoY), but remain muted relative to net asset values, with GPs prioritizing LP satisfaction over holding for peak returns.^4,5 Middle-market firms, in particular, adopt cautious risk appetites, extending diligence and avoiding overpayment in a sellers’ market for quality deals.⁶

Backstory on Pitchbook

Pitchbook, the source of this quote, is a leading data and research provider on private capital markets, founded in 2007 and acquired by Morningstar in 2016. It tracks over 3 million companies, 2 million funds, and trillions in deal flow, offering benchmarks, valuations, and investor insights drawn from proprietary databases. Known for its rigorous analysis of PE trends—like liquidity pressures and GP-LP dynamics—Pitchbook’s reports influence institutional allocators and GPs. This quote likely emerges from their 2025-2026 market commentary, aligning with surveys showing GPs willing to discount assets to unlock cash amid LP impatience.⁴

Leading Theorists and Theorists on PE Liquidity and Distributions

The quote ties into foundational and contemporary theories on agency problems in PE (GPs vs. LPs misaligned incentives) and liquidity transformation in illiquid assets. Key figures include:

• Michael Jensen (Agency Theory Pioneer): Harvard economist whose 1989 paper “Eclipse of the Public Corporation” theorized PE’s edge via active governance, but highlighted distribution pressures as LPs demand cash to mitigate agency costs—GPs holding overvalued assets to extend fees. Jensen’s work underpins why “crown jewel” sales signal LP pushback.⁴

• Josh Lerner (Harvard Business School): Co-author of Venture Capital and Private Equity: A Casebook, Lerner analyzes how liquidity crunches force exit engineering (e.g., secondaries, CVs). His research on 20%+ secondary growth shows GPs “manufacture” distributions, echoing the quote’s premature sales dynamic.²

• Steven Kaplan (University of Chicago): With Lerner, Kaplan’s studies (e.g., on PE performance cycles) document how LP pressure leads to discount-driven exits during droughts, as in 2025-2026, where GPs sell premiums assets at 11-20% haircuts to meet J-curve recovery expectations.^4,5

• Ludovic Phalippou (Oxford Saïd): Critiques PE’s fee structures and liquidity illusion, arguing GPs overhold “crown jewels” for carried interest but bow to LP redemption-like demands via GP-led secondaries. His work on continuation funds (now 20% of distributions) warns of sacrificed returns.²

• Contemporary Voices:

  Theorist/Analyst	Affiliation	Key Insight on PE Distributions
  Andrea Auerbach	Cambridge Associates	LPs self-initiate secondaries/CVs amid 2026 drought; “morphing market” demands liquidity over holds.2
  Josh Smigel	PwC US PE Leader	Creative deployment (CVs, secondaries) relieves LP pressure but signals selective recovery with uneven exits.3
  Hamilton Lane Forecasters	Asset Manager	Evergreens to capture 20% of capital, offering GPs alternative liquidity without selling jewels.1
  These theorists emphasize PE’s evolution from buy-hold-exit to hybrid models, where LP “thirst” drives short-termism in a $2+ trillion deal environment.1,3,5

  References

  1. https://iqeq.com/us/insights/global-private-markets-predictions-for-2026/

  2. https://www.cambridgeassociates.com/insight/2026-outlook-private-equity-venture-capital-views/

  3. https://www.pwc.com/us/en/industries/financial-services/library/private-equity-deals-outlook.html

  4. https://am.gs.com/en-us/advisors/insights/article/investment-outlook/private-markets-alternatives-2026

  5. https://www.morganstanley.com/im/en-us/institutional-investor/insights/outlooks/private-equity-2026-outlook.html

  6. https://www.wipfli.com/insights/articles/2026-private-equity-outlook-the-year-that-firms-get-humble

  7. https://www.ey.com/en_us/insights/private-equity/leading-through-change-2026-private-equity-trends

  8. https://www.privateequityinternational.com/a-new-hope-what-gps-expect-from-private-equity-in-2026/

  9. https://www.hubinternational.com/insights/outlook/2026/private-equity/