Family offices today face a growing challenge. Following the record-breaking private equity boom of 2021, their capital is locked away in private investments for years, while new opportunities emerge daily. The result? A growing liquidity crisis that’s reshaping how wealthy families manage their portfolios.
Liquidity: A Growing Focus in Alternative Investments
Private market holding periods have hit historic highs:
- VC funds: 6+ years (highest in a decade, according to PitchBook data)
- Exits: Increasingly rare despite Q1 2025 IPO activity up 51% in the Americas
- Portfolio flexibility: At nearly zero during lock-ups
In response, more family offices are exploring ways to unlock capital without waiting years for traditional exit events. This shift contributed to $162 billion in global secondary transactions in 2024, a 45% increase from the previous year, according to Jefferies’ Global Secondary Market Review.
Understanding Liquidity in Private Markets
Liquidity in private markets refers to accessing cash from investments typically locked up for years. Unlike public stocks that can be sold instantly, private market assets like private equity, venture capital, and startup shares require triggering events like IPOs, acquisitions, or fund distributions to return capital to investors.
This illiquidity creates a critical problem. It becomes nearly impossible to rebalance portfolios, redeploy capital, or meet cash needs when new opportunities arise.
“Without liquidity, investors are trapped and often delay their progress. Agility is key in today’s market,” explains Alex Simpson, Co-Founder of Liquid LP, who’s seen this shift firsthand.
Families often face limited flexibility, unable to reallocate capital or pursue timely opportunities in the public or private markets due to capital being tied up in long-term investments.
The issue extends beyond investment opportunities. Estate planning needs, succession challenges, or unexpected cash requirements can force families into difficult decisions when their wealth is tied up in illiquid assets.
Two Paths to Liquidity
When families need to access capital from private investments, they have two main options: selling or financing.
Secondary Market Sales: Investors can sell their fund positions to other investors, typically at a discount. If your private equity investments have grown 10x on paper, you might accept a 5x return to get immediate cash. The buyer takes on the risk and timeline in exchange for potentially higher returns.
Asset-Backed Financing: Rather than selling positions, families can borrow against their private market holdings. This approach allows them to retain ownership and potential upside while accessing capital for new opportunities. The loan is secured by the underlying asset value.
Specialized platforms have emerged to serve this market. Liquid LP, for example, focuses on preserving ownership while providing access to capital against illiquid fund positions. As Alex Simpson, Co-Founder of Liquid LP, explains: “We help investors unlock capital from illiquid funds without selling, allowing them to retain upside and move quickly on opportunities.”
Each approach has different timelines, costs, and tax implications. Secondary sales can take months to complete and may require accepting significant discounts. Asset-backed financing typically moves faster but involves ongoing interest costs and loan terms.
What Families Are Doing
Instead of selling illiquid assets at discounts, many families are choosing to finance against their positions. This approach preserves ownership while accelerating access to capital.
Real-world applications include using venture capital fund stakes to back direct deals, financing against private equity positions to fund AI investments, and leveraging illiquid assets to smooth generational transitions.
Recent market activity shows investors using their VC fund stakes to back $10M+ direct deals without selling or waiting for fund distributions. Others have financed against PE positions to fund AI investments, leveraged VC stakes for direct deals, and used illiquid assets to smooth generational transitions.
Industry data shows family offices increasingly use these approaches to fund generational transitions, capitalize on AI opportunities, and stay competitive without liquidating core positions. Providers like Liquid LP in this space typically help investors navigate complexities around GP approval, tax efficiency, and custom deal terms.
Younger family members, in particular, are pushing for more flexibility and faster access to emerging opportunities. Simpson notes: “There’s a growing need among the next generation to get involved in private markets, especially venture capital.”
3-Step Assessment Framework:
1. Audit Your NAV Reality
Don’t trust outdated valuations. Get clear updated NAV details and understand the true collateral value, not just what’s marked up. NAV (Net Asset Value) represents what your fund positions are actually worth, but these valuations can be outdated or inflated. Look at comparables like funds that they haven’t invested in to get realistic pricing.
2. Map Your Liquidity Options
Research providers before you need them. Understanding what liquidity providers you can have on hand and the process to get it done is equally critical.
Understand:
- Asset-backed financing terms
- Secondary market options
- Timeline for each solution
3. Build Infrastructure
Prepare before you’re forced to react. The most agile family offices today are those that planned their liquidity strategies in advance.
Infrastructure is the Advantage
Family offices managing sophisticated portfolios can no longer treat liquidity as an afterthought. As holding periods grow longer and investment opportunities accelerate, the ability to access capital without exiting core positions is now a strategic advantage.
For many liquidity providers, underwriting typically takes one to two weeks. Timelines often depend on how quickly families can provide complete financials, asset details, and supporting documentation. Delays are most commonly caused by missing paperwork or valuation discrepancies.
This is where infrastructure becomes essential. When data is well-organized, with ownership structures clearly mapped and documents readily available, the path to liquidity becomes faster and more efficient.
Platforms like MyFO help make this possible. By consolidating financial information, structuring entities clearly, and centralizing access to key reports and documentation, MyFO enables family offices to move quickly, reduce friction, and unlock capital with confidence.
Getting Ahead
Family offices managing sophisticated portfolios can no longer treat liquidity as an afterthought. As holding periods grow longer and investment opportunities accelerate, the ability to access capital without exiting core positions has become a strategic advantage.
The families succeeding in this environment are those who built their liquidity infrastructure before they were forced to react. They understand their options, have relationships with providers, and maintain organized documentation that enables quick decision-making.
As private market investments take up a larger share of family office portfolios, liquidity is no longer just about accessing cash. It’s about maintaining the flexibility to act on new opportunities while protecting the long-term value of carefully built positions.
