Private equity IPO exits fell 46% in 2024 compared with the prior five year average, leaving buyout firms sitting on roughly $3 trillion in unsold companies and forcing pension funds and university endowments to hold investments they cannot easily cash out of.
In Brief
- Traditional IPO exits made up just 6% of private equity exits in 2024, and total exits fell another 12% by mid 2025.
- Sponsor to sponsor trading, where firms sell assets to each other, jumped 141% as an alternative to going public.
- More than 34 million public sector workers rely on pension funds that now hold about 10% of their assets in private equity.
- A $162 billion secondary market has emerged where firms trade stakes among themselves instead of returning cash to investors.
- University endowments, unlike pensions, are increasing their private equity bets even as returns cool.
Why the Exit Door Keeps Narrowing
Private equity has always run on a simple playbook: buy a company with borrowed money, improve it, then sell it for a profit, often through an initial public offering. That third step has become the sticking point. IPOs accounted for only 6% of exits in 2024, and the slowdown has continued into 2025, with total exits down another 12% through midyear.
Firms have responded by turning to what are called continuation funds, essentially selling a company from one fund they manage to another fund they also manage. It sounds like shuffling money between pockets, and in practice that is close to what it is. These deals covered $41 billion worth of companies in just the first half of 2025.
Raising fresh capital has gotten harder too. Firms pulled in $592 billion over the year through June, the weakest total in seven years. They also returned only 11% of investor money last year, the lowest share since 2009, even while offering discounts to lure buyers back in. Vanguard senior international economist Kevin Khang summed up the shift bluntly, noting that firms are increasingly trading assets among themselves or accepting lower returns, and that the industry's heavy reliance on leverage is being reined in.
Pension Funds Are Stuck Holding the Bag
The private equity buildup inside pension funds happened fast. In 2001, a typical pension fund held essentially no private equity. By 2023, that figure had climbed to 10% of assets, which works out to roughly 20% of all pension assets nationwide once you account for how allocations vary across funds.
The returns have been genuinely strong: 13.5% annualized over the past decade. The problem is liquidity. Private equity stakes are hard to sell on demand, and with exits stalled, more than half of pension funds now find themselves overallocated, holding more private equity than their target mix calls for. When PE firms cannot sell portfolio companies and send cash back to investors, pension funds cannot redeploy that money elsewhere, which leaves their overall portfolios less flexible than intended.
Endowments Are Betting Bigger, Not Pulling Back
University endowments are moving in the opposite direction from pensions. Alternative investments, which include private equity, venture capital and real assets, now make up 55.7% of elite school portfolios, up from almost nothing three decades ago. Clemson University Foundation is raising its allocation from 18% to 24%, and the University of Utah has tripled its private equity stake from 10% to 30%.
Harvard holds 39% of its $53 billion endowment in private equity, while Yale has roughly half of its $40 billion invested there. The appeal is long term performance: large endowments averaged 8.3% annually over ten years, compared with 6.5% for smaller schools. But that strength has a cost. Universities are withdrawing about $30 billion a year collectively while recent three year returns sit at just 3.4%, meaning some schools are drawing down principal rather than living off gains.
Trading Among Themselves: The New Secondary Market
With public listings scarce and outside buyers hard to find, the industry built its own workaround. A secondary market, where firms buy and sell stakes from one another rather than exiting through a sale or an IPO, reached $162 billion in 2024 and is on pace to top $200 billion in 2025.
Regulators have taken notice. The Securities and Exchange Commission has been opening private equity access through special funds aimed at retail money, which brings in new capital but comes with added disclosure requirements around risk. Whether that broader access, combined with a revived secondary market, is enough to unstick the trillions in unsold companies remains the open question hanging over pensions and endowments alike as they wait for real exits to return.