What the World’s Most Sophisticated LPs Are Doing in 2025

The global private capital landscape in 2025 is defined by capital discipline. Liquidity constraints, macro crosswinds, and evolving return expectations have sharpened the behavior of Limited Partners (LPs), including the endowments, sovereign funds, pension giants, and family offices that anchor the private market ecosystem.

What are these sophisticated allocators actually doing?

We reviewed the latest LP surveys, private market updates, and strategic outlooks from top-tier sources and surfaced five clear behavioral signals that every GP, founder, and private market builder should understand.

1. Secondaries and Private Credit Are Top Priorities

Two strategies have emerged as the most preferred for institutional allocators in 2025: secondaries and private credit.

According to the Coller Capital Global Private Equity Barometer (Summer 2025), a survey of 110 institutional investors overseeing a combined minimum of $1.9 trillion in assets under management across North America, Europe, Asia Pacific, and the Middle East:

• 45% of the surveyed LPs plan to increase their exposure to private credit
• 37% of the surveyed LPs plan to increase their exposure to secondaries

These represent a clear directional signal from some of the world’s most experienced allocators who are reshaping their portfolios around strategies that offer:

• Cash yield that is contractual, recurring, and reliable
• Better entry points into quality assets without taking early stage risk
• Built-in downside protection, particularly in senior credit or discounted secondary acquisitions
• Flexible liquidity via secondary markets, allowing for rebalancing, rotation, and tactical adjustments

In a cycle where exit markets remain uneven and distributions are slower, LPs are prioritizing structures that can deliver income, manage risk, and support capital pacing.

These two segments are now seen as attractive portfolio allocations by institutions managing large balance sheets.

2. The Real Constraint is Liquidity, Not Risk Appetite

LPs remain committed to private markets, but with distributions slowing, they’re rethinking allocation tempo.

Private equity distribution yields, essentially the cash that LPs receive back from their GPs, have halved over the past three years:

• 2013–2021: ~25% of NAV per annum
• 2022–2024: ~12% of NAV per annum

That slowdown has choked re-up ability, especially for LPs managing fixed allocation targets.
The result? Tactical responses:

• Global secondaries deal volume hit $45B in Q1 2025, a 45% increase YoY
• LP-led secondaries held steady at ~$20B for the quarter
• GP-led secondaries surged to $25B, continuing momentum from a record $70B in 2024

The secondaries market has now become the release valve. LPs are using it to manage pacing, meet capital calls, and re-enter high-conviction positions without waiting for distributions to pick up. Secondaries are increasingly becoming a part of core portfolio infrastructure.

3. Venture Isn’t Dead, LPs Are Just Getting Sharper

After recent years of valuation resets and exit droughts, venture capital might appear out of favor. But sophisticated LPs aren’t walking away, they’re just getting more selective.

According to The LP Perspectives 2025 Study, which is PEI’s annual survey of institutional investors’ approach to alternative assets:

• 41% of the surveyed LPs plan to increase the number of relationships with venture GPs, up from 33% last year. The study surveyed 107 LPs anonymously between September and October 2024, providing a representative snapshot of global allocator sentiment.
• This increase is focused on smaller, early-stage funds run by specialist GPs with proven edge.
• Diligence timelines are also getting longer as LPs become prudent; one endowment reportedly took 12 months of discussions before backing a new fund.

LP behavior in venture has evolved from passive diversification to active filtration. They are:

• Prioritizing valuation discipline and transparent governance
• Avoiding style-drift in favor of specialist GPs with domain expertise
• Demanding clear differentiation, not just access

The bar is higher, but LP interest remains. Many recognize that innovation alpha is still disproportionately created at the seed and Series A stages. The difference? LPs now expect venture managers to act like stewards, not gamblers.

For emerging GPs, the opportunity is clear: If you can demonstrate authenticity, repeatable sourcing, and downside control, you’re in demand.

4. Infrastructure as an Asset Class Is Evolving and LPs Are Getting Bolder

Another theme that’s gaining steam in 2025: infrastructure isn’t just about yield anymore. It’s now a play on secular growth, climate resilience, and digital transformation.

According to McKinsey’s Global Private Markets Report 2025:

• 46% LPs plan to increase infrastructure allocations in 2025, the highest across all private asset classes. This finding draws on McKinsey’s proprietary LP survey of 333 institutional investors, conducted in January 2025.
• Brownfield and greenfield deals now represent 52% of infrastructure deal flow, up sharply from prior years. This reflects a clear shift toward higher-risk, higher-return opportunities.
• LP interest is shifting toward energy transition, digital infra (like data centers), and last-mile logistics. These themes combine yield with long-term structural growth.

The shift is clear: infrastructure now plays both defense and offense. On one side, it offers:

• Inflation-linked cash flows
• Low correlation to traditional equity markets
• Natural downside protection

On the other, it provides:

• Exposure to megatrends like climate adaptation, AI-fueled data center demand, and green mobility
• A chance to shape the environment for the next economic cycle

For LPs with long-dated liabilities, infrastructure has become a core allocation that helps them preserve their capital while deploying it thematically at scale.

5. From Scattered Diversification to Concentrated Conviction

Perhaps the biggest behavioral shift among top allocators? The move from broad-based diversification to concentrated conviction. LPs are moving away from broad-based portfolio coverage across managers and strategies, and instead concentrating capital around high-conviction themes and trusted platforms.

Today’s sophisticated LPs are:

• Backing bold and thematic strategies, from decarbonization to defense tech, longevity, and water infrastructure.
• Partnering with multi-asset GPs who can deploy across real estate, infra, and credit in an integrated manner.
• Consolidating GP relationships so that they have fewer partners, deeper engagement, and more co-investment alignment.
• Demanding GP skin in the game, with rising expectations for co-investment and capital at risk.

In short: LPs want fewer but stronger partnerships, deeper insight, and better alignment.

This change is forcing GPs to evolve from capital gatherers to solution architects. Those who can underwrite across cycles, create customized mandates, and move quickly on cross-sector bets are winning a disproportionate share of LP capital.

The old value prop of “access to deal flow” isn’t enough anymore. Sophisticated LPs want strategic partnership and they’re willing to pay for it.

Why This Matters for Builders and Investors

For those building in or allocating to private markets, the message is clear. Going forward, it is not about doing more. It is about doing what matters with sharpness, adaptability, and conviction. The LP playbook is changing. The opportunity lies in learning their language and building accordingly.

To stay relevant in this new regime:

• If you’re a GP: Build with intentionality. Offer liquidity options. Understand secondaries. Master capital pacing.
• If you’re a founder: Know that your cap table matters. Backers will be more sophisticated, more global, and more thesis-driven.
• If you’re an allocator: The bar is higher, but the opportunity set is wider. Considering thematic mandates, custom strategies, and flexible capital models will be key.

The takeaway? LPs are no longer just funding sources, they’re shaping the future of private markets. In a cycle defined by selectivity, those who understand how LPs think and behave will hold the upper hand.

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