The Secondaries Surge: A Catalyst for Asymmetric Value in Private Equity

The private equity landscape is undergoing a seismic shift, and sophisticated investors would be remiss not to notice it. Harvard University and Yale University, icons of endowment-driven investment excellence, are now leading a wave of liquidity-driven secondary sales of private equity stakes. These moves—driven by political pressures, market volatility, and structural challenges—are creating a rare opportunity for investors to acquire high-quality assets at discounts. The time to act is now.

The Perfect Storm: Why Harvard and Yale Are Selling

Both institutions have long been synonymous with the “Yale Model,” a strategy of allocating heavily to illiquid, high-return assets like private equity. Harvard’s $1 billion secondary sale to Lexington Partners and Yale’s planned $6 billion sale (managed by Evercore) signal more than just a tactical adjustment—they mark a paradigm shift.

Key Catalysts:
1. Political Pressures: The Trump administration’s freeze on federal research grants and threats to tax endowments have created existential liquidity risks. Harvard, for instance, faces a $2.2 billion grant freeze, forcing it to issue $1.2 billion in municipal bonds to shore up liquidity.
2. Market Liquidity Drought: Private equity exits have slowed to a crawl. In Q1 2025, global exit activity hit a two-year low of $80.81 billion (Preqin data), with distributions from buyout funds falling to 11% of net asset value—down from 29% in 2017.
3. Structural Overexposure: Harvard’s $124 billion in unfunded private equity commitments and Yale’s $6.51 billion in similar obligations highlight the fragility of endowment models reliant on perpetual capital calls.

The Opportunity: Discounted Stakes with Asymmetric Upside

The secondaries market is now a buyer’s arena. Secondary sales typically trade at 80–90% of NAV, but current conditions could push valuations even lower. For investors willing to navigate the complexity of private equity ownership, this creates a compelling asymmetry: limited downside (if valuations stabilize) and significant upside if markets rebound.

Why Now?
- Ackman’s Warning as a Buying Signal: Pershing Square’s Bill Ackman has long criticized passive investing and warned about private equity’s structural limitations. His push to transform Pershing into a Berkshire-style conglomerate underscores a belief that traditional fund structures are inadequate. For investors, this signals that even seasoned operators see value in buying assets at a discount.
- Secondary Market Liquidity Premium: Secondary buyers gain access to mature, cash-generating assets without the lock-up periods of primary funds. Yale’s sale, for example, includes stakes in private equity funds nearing their final distributions—a timing advantage.
- The End of the “Yale Model” Illusion: The model’s reliance on illiquidity premiums is under siege. With secondary pricing now reflecting reality, investors can acquire stakes in sectors like tech, healthcare, and infrastructure at valuations that no longer assume perpetual growth.

Strategic Plays: Where to Look

1. Leverage Secondary Market Experts: Lexington Partners and Evercore have deep expertise in pricing and executing these deals. Partnering with them—or analyzing their transactions—can uncover undervalued assets.
2. Focus on Maturity-Stage Funds: Stakes in funds 7–10 years into their lifecycle offer clearer visibility into returns. Harvard’s sale includes such assets, which are often undervalued in secondary markets but have near-term distribution potential.
3. Avoid Overexposure to Federal Grant Dependency: Institutions like Harvard are selling because they can’t rely on government funding. Investors should prioritize assets in sectors less tied to political whims, such as infrastructure or private credit.

The Risks—and Why They’re Manageable

Critics will point to risks: the potential for further valuation declines, prolonged exit droughts, or regulatory overreach. But these risks are already priced into secondary sales. The bigger risk is missing the once-in-a-generation opportunity to acquire stakes in proven private equity funds at discounts.

Conclusion: Act Now—Before the Discount Disappears

Harvard and Yale’s sales are not just about liquidity—they’re a confession of vulnerability in the face of systemic headwinds. For investors, this is a call to action. The secondaries market is offering asymmetric value: a chance to buy high-quality private equity stakes at prices that don’t reflect their long-term earning potential.

The window won’t stay open forever. As institutions rush to monetize assets, valuations could stabilize—or even rebound—if secondary markets absorb the supply. But for now, the math is clear: the downside is capped, and the upside is vast. This is a rare moment to invest like the institutions themselves once did—only this time, on your own terms.

The next decade’s winners will be those who act decisively here and now.