Sometimes it seemed like everyone was becoming a “holdco” in 2025.
As private equity firms, sometimes reluctantly, held on to their portfolio companies for longer periods, many started to look more like permanent capital vehicles or holding companies – “holdcos” in the parlance. PE firms now hold their portfolio companies for nearly seven years on average, up from less than four years two decades ago.
With Berkshire Hathaway as an appealing model, the private equity giant KKR launched its own “strategic holdings” unit at the beginning of 2024 to hold companies on its own balance sheet, as opposed to in its funds.
And then there were newcomers like Nine Dean, launched with an anchor investment from the Ford Foundation with a focus on quality jobs, and Trimtab Impact, an “unapologetically impact first” holding company that aims to change the risk-return-impact equation for wealthy families. The long-term ownership mindset that comes with a holding company model creates a different set of value drivers.
“Many large private equity platforms already have long-dated funds or a balance sheet designed to hold assets for decades,” said Aren LeeKong, founder and CEO of Nine Dean.
“The logical next step is increased focus on the broader elements that make people the most important asset of any company— including fair wages, quality healthcare, and strong benefits,” he said.
The emergence of structures like holdcos reflected the search for solutions in one of the most challenging fundraising and investing environments in a generation. Since ImpactAlpha launched LP/GP as a specialized weekly newsletter in February, we’ve explored the growing markets for GP stakes and co-investments. And we’ve charted secondaries, continuation funds and other creative exits to recoup capital (see also, “Adding a dash of guaranteed liquidity to impact funds to attract more institutional LPs”).
Our guides have been some of the most experienced investors in the business, including Tom Steyer, the founder of Galvanize (and now candidate for governor of California), who said his firm is scooping up climate deals as other investors shy away. New York City pension investment chief Steven Meier shared how he commands “early bird” and “big bird” discounts on fees from GPs for being an early – and large – investor.
“We’re setting out to grow the company’s impact and grow the investors’ capital, and so finding companies where that is mutually reinforcing is absolutely essential,” Johanna Riess, who co-heads the impact practice at Apollo Global Management, told ImpactAlpha. “We as a firm really lean in when others are leaning out. These moments of dislocation are wonderful opportunities for the prepared.”
Liquidity drought
The lack of exits through acquisitions or IPOs has left limited partners anxious to get their money back. “DPI is the new IRR,” as Mubadala’s Jean Francois Roberge put it, referring to the importance of distributions of paid-in capital even over traditional metrics like internal rates of return. Capital distributions to limited partners are at all-time lows.
The need for liquidity and distributions to LPs drove the growth of secondary sales and continuation vehicles, as tariffs and global volatility caused would-be acquirers to hit pause. But even with an uptick in deals and IPOs that began late this year, those trends are likely to stay strong.
One data point: North Sky Capital, one of the rare firms focused on buying up impact stakes on the secondary market, is looking to raise $250 million for its fifth such fund.
A tough fundraising environment has put LPs in a powerful position. Big investors have the clout to demand more access to fee-free co-investments. The New York City pension system, for example, typically tries to negotiate about a third of its total investment in a given fund as co-investment, Meier, decamped to Neuberger Berman this month, told ImpactAlpha in July.
Such “no-fee, no-carry private equity,” Meier said at the time, “will really have a positive impact on the portfolio returns.”
When sustainable infrastructure investor Generate Capital extended a $200 million loan to Pacific Steel Group to construct the first green steel mill in California in January, CalSTRS and Australian pension fund HESTA — both investors in Generate — co-invested alongside Generate Capital’s strategic credit initiative (for background see, “That (mixed) feeling when your LP co-invests in the sweet deal you’ve just negotiated”).
“When you’re raising a fund these days, a key consideration for some LPs is how much co-investment you are expected to be able to give them,” Generate’s former CEO, Scott Jacobs, told ImpactAlpha at the time.
There are other issues factoring into LPs’ decision making. Co-investments give LPs a way to get to know managers that might not be in the market or a fit with client demand at the moment.
“A co-investment has been a great way to look at how they source, understand how they do their diligence, understand how developed their infrastructure is, and what monitoring capabilities they have,” said Giulia Roverato of New York-based Wilshire Advisors, which advises on more than $1.5 trillion in institutional assets.
Suyang Kim of the South Korean sovereign wealth fund KIC, also sees dual benefits from co-investments. “We’re trying to generate the alpha with the co-investment, and by making commitment to their existing funds, we can evaluate how they do” and what kind of pipeline they have, he said.
Universal owners
Institutional investors with broad exposure to public equities markets are reshaping the impact investing market. Pension funds, insurers and banks now supply more than half of new capital flowing into the sector, overtaking the foundations and family offices that once defined it. Pension funds alone accounted for 35% of new commitments in 2024, according to the Global Impact Investing Network’s annual “State of the Market” survey.
In the US, these long-term investors are under attack from the Trump administration and Republican state leaders that have taken on ESG investing (for environmental, social and governance factors) as a threat to fossil fuel financing. Nonetheless, leading pension funds and other institutional asset owners are doubling down on their commitments to climate and investments that safeguard their portfolios and their beneficiaries (see, “Survey of GPs, LPs and advisors shows impact investors to be hopeful but cautious).
California pension giant CalPERS is looking to generate outperformance by investing in climate solutions and emerging and diverse managers. It has invested some $60 billion in climate solutions, nearly two-thirds of the way towards its goal set two years ago to invest $100 billion in climate investments by 2030.
With over $620 billion in assets under management, CalPERS’ Peter Cashion told the pension fund’s board last month that its sustainable investments program “is positioned to advance from strategic development to full implementation.”
In Australia, Health Employees Superannuation Trust of Australia, or HESTA, is investing in climate solutions, housing and healthcare. “We continue to focus on investing for the long-term, supporting thematics that we believe will support strong investment returns for our members into the future,” HESTA’s Sonya Sawtell-Rickson tells ImpactAlpha.
First-time and emerging managers
Small fund sizes and thin track records have long kept first- and second-time fund managers on the margins of institutional capital. Yet these same funds are often where the most specialized and inventive strategies take shape — from worker ownership to diverse founders to gender and climate strategies.
“We think that today’s scrappy managers who gut it through a prolonged down cycle, outside of over-hyped markets, are going to be more resilient investors in the long term,” says Spring Point’s Margot Kane. “They are more likely to have high clarity of thesis and conviction, and to invest in real companies that produce impactful products and services for real people.”
Spring Point, she tells ImpactAlpha, is “excited about GP teams who are motivated to prove their mettle and value-add in this kind of market cycle despite the negative signals, and who see this point in time as an opportunity to redefine what investing in tomorrow’s innovation markets looks like.”
Venture capital fundraising in 2025 is expected to fall to its weakest level in more than a decade, with capital flowing to established firms. Globally, just about half of venture fundraising closes in the first three quarters of the year were led by experienced general partners, a share that has crept up almost every year since 2015.
But by dollars raised, there are signs of movement: experienced managers captured 72% of capital in 2024, but that share dropped to 63% in early 2025 — suggesting emerging managers are gaining ground.
The economics remain unforgiving at the smaller scale that these funds are working with. The median fund between $1 million and $10 million spends 3.4% of its committed capital on operating expenses during its first five years, according to Carta, versus just 1% for funds over $100 million.
Part of what these small and emerging managers are working against is structural. After pulling back from large buyout funds, CalPERS, CalSTRS and other pension funds have stepped up support for smaller and emerging managers, betting on specialization and performance over pedigree.
“There has been a migration to smaller funds” in venture and growth equity, said CalPERS’ Anton Orlich at this year’s California’s Emerging & Diverse Investment Manager Forum in Sacramento, Calif. “And I think by and large, the better opportunities in those spaces tend to be with smaller funds.”
Other investors are taking ownership stakes in the managers themselves rather than just investing in their funds. Firms like Capricorn Investment Group and TPG Next buy minority positions in sub-$1 billion new managers with deep domain expertise. This gives them a share of the management fees those firms earn, plus upside as the firm scales over time (see “Asset managers are scooping up ‘GP stakes’ in impact funds”).
Capricorn’s Sustainable Investors Fund has helped seed more than a dozen independently operated impact fund managers, including real assets investor Vision Ridge Partners; Lafayette Square, which invests in middle market companies in overlooked communities; and MSquared, a women-owned real estate impact platform.
Capricorn says it has helped grow the total assets under management of its partner firms more than sixfold over the past five years, to $20.8 billion by mid-2024. Each dollar of GP-stakes capital, the firm adds, has the potential to unlock more than $10 of institutional capital for impact strategies.
New financial tools are addressing operational constraints. Earlier this year, Community Capital Management and Mission Driven Finance joined forces to create Bold Line Capital, which offers credit lines that bridge the timing gap between when a fund needs to deploy capital and when limited partners wire the money.
Canada’s Social Finance Fund is building a different kind of investment ecosystem, with “wholesale” capital allocated to intermediaries to help build the country’s emerging impact venture capital ecosystem.
Private credit jitters
Investment giants spent their third quarter earnings calls this fall defending their private-credit investments amid spreading concerns about hidden risks in the ballooning asset class. Those concerns exploded when the October bankruptcy of First Brands, a heavily indebted auto parts supplier, led to steep losses for some lenders. Other credit blowups have followed, and the AI data center buildout is fueling massive off-the-books debt deals (see “Debt bubble? Private credit jitters put even impact investors on edge”).
“There is clearly a private debt bubble,” says Robert Brown of Impact Evaluation Lab. “There are risks that are not being priced in.”
Private credit has ballooned to $3 trillion, up from $2 trillion in 2020, in part driven by investors’ quest for cash as private equity distributions slowed to a trickle. The question: whether impact-driven private credit strategies are somewhat insulated from the broader concerns.
About half of impact investors in the GIIN’s recent survey were pursuing private debt strategies. LPs are now scrutinizing managers more closely than ever. They are looking for differentiated strategies and conservative underwriting, and avoiding low-margin loans in crowded sectors that encourage looser terms (see, “In jittery private credit market, LPs look for differentiation, co-investment and sustainability).
One sector where investors see opportunity for growth is sustainable infrastructure and the energy transition. “We believe there’s a massive market opportunity set,” said Joshua Kim of CalSTRS.
Kim, who leads private credit for the pension fund’s $1.3 billion Sustainable Investment and Stewardship Strategies, is looking to get a jump on cash-flowing sustainable assets to boost returns while longer term equity investments, which make up two-thirds of the SISS strategy, play out. That means scooping up private credit secondaries and other mature assets.
A challenging economy may create private credit leaders and laggards. “Reading the headlines, it’s either the golden age of private credit, or, ‘Oh my God, we’re about to enter the next financial crisis,’” said Chris Creed, a partner with climate investor Galvanize’s credit and capital solutions strategy.
“And I don’t think that that has anything to do with the kind of private credit that [we] are talking about.”
