Portfolio Liquidity: Distributions Still the Bottleneck

Section I: Challenges for LPs · from The State of Private Equity, Part 2B: Challenges and Opportunities for LPs.

Despite 2025's rebound in deal and exit activity, global PE-backed exit value rose 41% to $1.3 trillion, aided by a nearly-doubled IPO market and the blockbuster Medline offering, the largest PE-backed IPO as of that date¹, cash isn't flowing back to LPs at anywhere near the pace it once did.

Distributions as a share of NAV have remained below 15% for four consecutive years, a level not seen since the depths of the 2008–09 global financial crisis. The industry's stock of unrealized assets has swelled to roughly 32,000 companies worth $3.8 trillion.² Average holding periods at exit have stretched to around seven years, up from five to six years for most of 2010–2021, and almost 40% of all portfolio companies are now held for more than five years, up from 29% in 2019.²

Chart in the full report — source: Bain²

McKinsey's data points to the same imbalance from a different angle: as detailed in "The State of Private Equity, Part 2A: Challenges and Opportunities for GPs," the stock of aging portfolio companies held more than four years has climbed to the highest share of buyout-backed inventory on record.³ With that much capital tied up in aging portfolios, LPs are left waiting longer than ever to see cash come back, regardless of how strong headline deal and exit values look. The IPO window for PE companies may already be narrowing again due to the Middle East conflict, with H1 2026 shaping up as a quieter IPO market than late 2025 suggested (except the SpaceX IPO).⁴

Chart in the full report — source: Bain⁵

KKR's capital-markets liquidity indicator, which tracks IPO, high-yield bond, and leveraged-loan issuance as a share of GDP, points to the same conclusion: the indicator is projected to reach roughly 4.7% of GDP by year-end 2026, up from the 1%–3% range of recent years, but still below the 4%–6% long-term norm and well short of the 2021 peak of 8.1%.⁶

Chart in the full report — source: KKR⁶

ORIX puts a number on how long this backlog could take to clear at the current distribution pace: working through the existing inventory of unsold companies would now take 16.7 years, more than double the 7.1 years it would have taken as recently as 2024, an alarming figure if the exit market does not improve.⁷

Chart in the full report — source: ORIX⁸