The New Liquidity Playbook: Balancing Flexibility and Growth in Private Markets

In the traditional investment paradigm, liquidity has long stood in tension with long-term growth. Public markets offered liquidity at the expense of higher volatility, while private markets promised outsized returns—but often at the cost of locking up capital for years.

As private markets continue to mature and attract a broader set of investors, the demand for more flexible liquidity solutions is rising sharply. Against a backdrop of delayed exits, slower distributions, and elevated macro uncertainty, investors are rethinking how to manage liquidity without compromising long-term performance.

In response, the industry is innovating. New financial instruments and portfolio strategies are emerging that seek to strike a better balance between access and ambition. Here’s how the new liquidity toolkit is taking shape.

Emerging Financial Instruments Bridging Liquidity and Growth

Evergreen Funds: Flexible Capital Meets Long-Term Alignment

Evergreen funds are redefining how investors access private markets. Unlike traditional closed-end structures that raise capital, invest over a set period, and then wind down, evergreen funds offer ongoing subscriptions and periodic redemption windows—typically quarterly or annually.

This structure brings a new kind of optionality. For managers, it allows greater flexibility in holding or exiting investments based on fundamentals, not fund timelines. For investors, it provides long-term exposure to private assets with scheduled opportunities to adjust allocations.

But evergreen structures also introduce new dynamics: valuation cadence, redemption gates, and liquidity matching mechanisms all play a role in how effectively these funds deliver on their dual mandate of growth and liquidity. Institutional investors are increasingly incorporating them into their core portfolios—but with a clear-eyed understanding of these mechanics.

Private Asset ETFs: Democratizing Access—with Caveats

Private asset ETFs represent another bold stride toward liquidity. These vehicles aim to package exposures to private equity, private credit, and real estate into exchange-traded formats that can be bought and sold like traditional ETFs.

For many, they offer the best of both worlds: exposure to historically hard-to-access markets and the ability to rebalance in near real-time. Products like Blackstone’s BCRED or Hamilton Lane’s Private Assets Fund (PAF) have gained significant attention, attracting billions in capital from both retail and institutional investors.

However, the model isn’t without friction. Because these ETFs often rely on estimated NAVs for their underlying assets, pricing can diverge from true portfolio value, especially in volatile environments. Liquidity in the secondary market is another consideration—some of these funds rely on interval structures with limited redemption windows, which investors must understand going in.

And on the regulatory front, private asset ETFs still operate in a gray zone. Regulators are watching closely, and evolving disclosure rules and valuation requirements could shape the future of these products.

Innovative Liquidity Solutions in Action

Private Credit Funds: A New Source of Strategic Liquidity

As banks pull back from middle-market lending, private credit has stepped into the void—and in doing so, is playing a new role in liquidity provision.

Private credit funds are increasingly being used not just for traditional debt financing, but for liquidity-driven transactions: recapitalizations, secondary sales, and bridge loans that unlock capital for both companies and investors. For example, a founder seeking partial liquidity without a full exit might turn to a private lender for a structured solution. Likewise, private equity sponsors are tapping credit markets to finance GP-led secondaries or continuation funds.

These funds offer speed, flexibility, and custom structuring that traditional lenders can’t match. For investors, they present a way to access credit-like returns with less exposure to public market volatility—though with higher complexity and less transparency.

Collateralized Fund Obligations (CFOs): Unlocking Portfolio Liquidity

Structured finance has also found its way into private markets. Collateralized Fund Obligations (CFOs) bundle diversified portfolios of private assets—such as limited partnership interests in PE or credit funds—and issue long-term bonds backed by those assets.

These instruments allow institutions to raise liquidity from illiquid holdings without having to sell them outright. The recent $750 million CFO issuance by Churchill Asset Management is a prime example: investors gained access to private markets exposure in a debt format, while the issuer unlocked liquidity for other strategic uses.

For allocators, CFOs offer the potential to monetize long-dated investments while maintaining upside exposure. But they also introduce complexity around asset selection, tranche structuring, and credit risk—making them most suitable for sophisticated investors.

Integrated Liquidity Management: A Holistic Approach

Liquidity isn’t just about instruments—it’s about strategy.

Integrated liquidity management is gaining traction as a portfolio-level approach that balances growth-oriented private market exposure with a thoughtful allocation to liquidity-enhancing tools. Rather than treating illiquid and liquid assets as separate silos, leading managers are increasingly combining them into a unified framework that supports both investment performance and near-term capital needs.

This approach might include a mix of evergreen funds, NAV-based credit lines, structured products, and private credit vehicles—backed by real-time portfolio modeling to anticipate future liquidity needs. A well-equipped private markets manager can play a central role here, helping investors allocate capital more effectively and avoid reactive selling in times of stress.

For institutions and family offices alike, integrated liquidity strategies are emerging as a core capability—not just a nice-to-have.

Practical Steps for Investors

For investors navigating this evolving landscape, a few key principles stand out:

Assess Liquidity Needs Holistically
Understand your short-, medium-, and long-term capital needs. Liquidity isn’t just about having cash on hand—it’s about aligning your portfolio with your liabilities and strategic goals.

Diversify Liquidity Sources
Don’t rely on a single tool. Use a mix of evergreen funds, interval funds, credit lines, and secondaries to build flexibility into your portfolio.

Perform Rigorous Due Diligence
Innovative structures can mask hidden risks. Scrutinize fund documents, valuation methodologies, and redemption mechanics. Ask how each instrument performed during recent stress events.

Partner with Experienced Managers
The difference between a well-run liquidity solution and a poorly structured one can be substantial. Work with managers who have experience navigating multiple market cycles and can demonstrate robust risk management frameworks.