Pitchbook Article
LPs flooded the secondary market during tariff upheaval. Buyers paused.
In the week since President Donald Trump placed reciprocal tariffs on dozens of countries, Hamilton Lane phones have been ringing off the hook.
“There’s been a ton of inbound conversations,” said Keith Brittain, who oversees the over $950 billion asset manager’s secondary business. “Limited partners are calling us, asking us if we’re still active buyers and what the pricing is for these funds.”
Other secondary buyers are likely receiving a similar influx of calls, as pensions, endowments, family offices and foundations consider offloading portions of their illiquid investments on the secondary market. While distributions from private market fund commitments have been slow for the past few years, this week’s stock market plunge dashed hopes of a near-term revival in initial public offerings and other exit activity—and, therefore, returns to LPs.
Many of the inquiries from LPs were just feelers: LPs reevaluating risks to their entire portfolios and running “what-if” scenarios, Brittain said. But as a buyer of both LP- and GP-led secondary stakes, Brittain’s answer was almost always that market volatility had made it nearly impossible for secondary buyers to price assets.
For now, dealmaking in the secondary market has stalled. Buyers like Hamilton Lane are taking a step back as they wait for PE managers to fully assess the impact of newly announced tariffs and recent public market swings on their portfolios.
Wednesday’s 90-day pause on reciprocal tariffs provided a smidgen of certainty for secondary buyers—but not enough to determine the actual value of LPs’ fund stakes. While it’s still too early for buyers to determine an exact price for LPs, estimates are now possible, Brittain said.
Any deals coming into the market in the weeks and months ahead will likely be priced based on Q4 2024 valuations, said Justin Lux, a managing director at FS Investments, a company focused on buying LP stakes in mid-market buyout funds.
“This is a period of price discovery between buyers and sellers, which leads to a widening bid-ask spread and ultimately fewer completed transactions,” Lux said.
As PE firms reprice their portfolios and bring assets back to the market at revised valuations, secondary firms may find more favorable entry points, he said.
In addition to pricing uncertainty, some secondary buyers remain hesitant to take on tariff-related risks. Chris Lawrence, a managing partner and founder of Labyrinth Capital Partners—a PE firm focused on GP-led secondaries and direct secondaries—likened investing in companies with significant supply chain exposure at this uncertain moment to “catching a falling knife”—a term popularized during the 2008 global financial crisis.
Lawrence said he believes current market volatility will drive more sellers to seek liquidity, potentially boosting secondary transaction volume in the short term. However, he said he does not anticipate widespread fire sales in the private equity market—except, perhaps, for assets exposed to supply chain risk in China.
“I don’t see a fire sale situation in the broader market,” he wrote in a message to PitchBook on Wednesday after the 90-day tariff reprieve was announced. “For those with China exposure—that may be a different story until that situation is further clarified.”
“More unknowns mean more risk for those companies,” he added.
Featured image by Iskandar Zulkarnaen/Getty Images
