Panel
Navigating Liquidity Challenges in Private Equity | Global Conference 2026
Milken InstituteIvan Lehon, Jenny Chan, Dipanjan "DJ" Deb, Dean Mihas, Yann Robard, Jonathan D. Sokoloff, Paul Taubman, DJ, Jan Robart
- The private equity exit environment remains constrained due to valuation gaps and extended holding periods, with distributions averaging 20% of NAV or lower for 2023, 2024, and 2025—the longest liquidity recovery in the last 25 years.
- DJ (Francisco Partners) forecasts liquidity to be lower in 2026 than projected four to five months prior, citing a potential 3–6 month delay before market clarity emerges despite the stock market's recent gains.
- John (Dawson Partners) identifies exits as a "crisis" for the industry, noting that current annual exits (50–67% of the ideal 20% of NAV) are significantly below Bain Consulting targets, leading to extended hold periods and declining IRRs.
- Jonathan (Leonard Green) reports that while strategic sales and PE sales remain the highest priority, the IPO market has become less attractive for most private equity firms unless a company has a significant size profile (e.g., $5B+ EV) or exceptional growth.
- Paul (PJT Partners) argues that the mismatch between assets needing monetization and the market's capacity to absorb them will persist regardless of M&A or IPO market strength, necessitating a "third way" like continuation vehicles (CVs).
- Jan (Dawson Partners) notes that continuation vehicles currently represent approximately 15% of all exits, a figure projected to remain stable even if traditional liquidity returns, as they provide a necessary liquidity channel for LPs.
- Jenny (Children's Hospital of Philadelphia) observes a shift in LP sentiment, with recent transparency from GPs regarding CV selection criteria helping to challenge the historical stigma that CV assets are inherently subpar.
- Leonard Green raised a $3.6 billion fund solely for single-asset continuation vehicles in January, the largest of its kind, with the team already 25% invested and generating an "infinite" IRR on uncalled capital.
- The industry is facing a bifurcation where "winners" are distinguished by high DPI (Distributions to Paid-In Capital), which is increasingly viewed as the superior performance metric over IRR due to the tension between GP compensation (multiple of money) and LP incentives (IRR).
- DJ highlights that the upcoming 2026 vintage is likely to be "amazing" and "busy," contrasting with the last three to four vintages which are expected to underperform historically due to delayed realizations.
- AI is identified as a "meta wave" comparable to the internet, expected to create a sharp dispersion of winners and losers in software and technology, forcing portfolio companies to reinvent themselves to maintain terminal multiples.
- Paul Taubman predicts the IPO market's structural challenges will persist, noting that banks now require companies to have double-digit organic growth, low leverage, and massive scale (e.g., $5B–$10B EV) to succeed, excluding the majority of mid-market PE-backed firms.
- Dean (GTCR) reports that while hold periods have not significantly elongated for their firm (averaging 5–6 years), they are seeing a "reckoning" over the next 3–5 years where firms failing to manage liquidity and exit readiness will face significant fallout.
- John Sokoloff admits that portfolio companies are carrying marks that are too high, forcing a difficult choice between extending hold periods (which lowers IRR) or selling at prices below current valuations to realize returns.
- The panelists note that the traditional 10+2 fund structure is becoming misaligned with reality, as companies are staying private longer (10+ years), leading to expectations for longer extensions (10+5 or 10+7) and increased reliance on secondary markets for liquidity.
- LPs are increasing scrutiny on conflict of interest in continuation vehicle transactions, demanding that GPs demonstrate fair processes, independent valuation, and alignment of interests rather than using CVs merely to move "stuck" assets.
- Jan Robart warns that while CVs are a vital tool, the secondary market is undercapitalized relative to demand, with capital raised ($165B) outpacing deployment ($225B) in some years, indicating a shrinking dry powder perspective.
- DJ forecasts that AI will drastically reduce the software vendor stack for many portfolio companies (potentially from 22 vendors down to 3 core systems), creating massive margin improvement opportunities for operators who can adapt.
- The industry is moving from a model of "multiple expansion" (fueled by leverage and growth at all costs in 2008–2021) to a "margin improvement" phase, where operating value creation via EBITDA growth is the primary driver of returns in a high-multiple, lower-leverage environment.
- Jonathan notes that underwriting has fundamentally shifted to include a "reverse exit" analysis, requiring GPs to map out potential buyers, valuations, and capital structures for the next owner before investing.
- Paul Taubman suggests that Public-to-Private or Reverse IPO transactions (merging a portfolio company into an existing public entity) may emerge as a viable alternative for companies too small for a standalone IPO but needing capital structure optimization.
- The panel concludes that while 2026 may see a rebound, the structural need for a larger secondary asset class is permanent, as the volume of private assets ($8T in private equity/venture) far exceeds the current capacity of traditional exit routes.