25 Sep 2025
Navigating Uncertainty: How Fund Managers Stay Resilient
After years of turbulence, fund managers are adapting with resilience and strategy to a complex alternative investment landscape.
After several turbulent years, alternative investment funds are faced with an increasingly complicated market landscape, with limited exits, constrained liquidity, and rising macroeconomic uncertainty.
But in spite of these challenges, fund managers are showing remarkable resilience and tailoring their strategies to fit the new market reality. Increasing use of evergreen structures, NAV financing and continuation vehicles are just a few of the ways that general partners (GPs) are maintaining positive traction.
Here, industry experts and RBS International sector specialists explain how funds are coping with the realities of 2025’s complex financial environment – and point to where new opportunities might appear.
Market challenges persist in H2
Private markets have faced persistent headwinds for a few years now.
Parin Avari, Director, Institutional Banking at RBS International, says: “It's well-known that it’s been a challenging period for private markets since 2022, particularly as a result of inflationary pressures and interest rates rapidly increasing, therefore impacting exit activity and fundraising. Whilst there was cautious optimism at the start of 2025, the geopolitical environment has continued to create uncertainty and dampen market activity.”
With uncertainty around US tariffs, supply-chain friction, and broader geopolitical instability, investors are increasingly wary.
Geopolitical risk adviser, Scott Livingstone OBE, identifies three main drivers of doubt in the market: the shifting state of US politics, recent failings in global governance, and the technology revolution. Additionally, he says, changing population demographics and the potential impacts of climate change are adding to market hesitation.
But he remains confident that investors and fund managers can overcome these challenges with a combination of innovation and fearlessness.
“It’s about being agile and not losing your nerve,” he says. “There are still plenty of opportunities out there, and there is incredible resilience and strength in our societies and economies here in Europe.
“But we’re in uncharted territory, and in future we won’t be able to look at the world in such a binary fashion. There are going to be so many shades of grey, so we need to become much more sophisticated, and look at risk in a more granular, nuanced way.”
Evergreen funds and the rise of private wealth LPs
One of the most notable trends in recent years has been the expansion of evergreen funds. They now account for roughly 5% of all assets under management in private markets and will be 20% of AUM in 10 years’ time, according to a 2025 Market Overview from Hamilton Lane.
Fund managers are embracing evergreen and semi-liquid vehicles, because they allow them to raise and deploy capital over longer, more flexible time horizons – a distinct departure from the rigid lifecycle of traditional closed-ended funds.
Beyond offering enhanced flexibility, evergreen and semi-liquid fund structures are also opening the door to private wealth.
“Professional investors and private wealth platforms are actively seeking greater exposure to private markets,” says Parin. “Yet the conventional closed-ended model often proves limiting. Through launching specialised evergreen funds, managers are expanding their private wealth offerings, therefore diversifying their own investor base whilst also providing LPs with the liquidity optionality they increasingly require.”
She adds: “It’s an exciting time for the industry, particularly as regulators begin to open private markets to individual retirement savers. Initiatives such as the UK’s Long Term Asset Fund (LTAF) and Europe’s European Long Term Investment Funds (ELTIF) are likely to further drive demand for evergreen funds.”
The rise of the secondaries market
One asset manager which has been built to thrive in this market landscape is Pantheon. Alongside its primary and co-investment platforms, continuation vehicles and a differentiated evergreen platform that includes seven funds across different asset classes and geographies allow it to take a flexible approach.
Petra Bukovec, Partner in Pantheon’s Global Secondaries team, says: “The secondaries market has shown some increasingly interesting opportunities over recent years, and we expect the lack of recent distributions, plus the increasing need for investors to rebalance portfolios, to continue to drive this.”
Recent numbers appear to support bullishness around the secondaries market. Fundraising for secondaries vehicles hit an all-time first-half high in 2025, with $80.84 billion raised, according to a report by Secondaries Investor.
That figure is larger than some prior full-years and is 90% larger than the previous H1 record of $42.5 billion, set in 2023.
Petra adds: “We continue to see value in the mid-market, given the huge opportunity set on offer in that segment of the market, which can create inefficiencies that may be leveraged by investors that can access them via managers with relationships developed across primary deals, co-investments, and other transactions”.”
However, while strategies are evolving, LPs haven’t shifted their priorities or risk appetites, she says.
“They are still looking for outsized returns from their private market investments. But the dearth of distributions over recent years has impacted their behaviours – we’ve seen a lower rate of investing, more sales, and a consolidation of GP relationships.
“In today’s environment, one size doesn’t fit all – we need to be sensitive to clients’ portfolios and their requirements. Having the ability to allocate across different asset classes gives us the ability to create those individual portfolios that best meet our clients’ needs.”
Continuation vehicles and NAV financing
As closing out existing funds becomes more challenging, fund managers are increasingly turning to continuation funds to offer liquidity to existing investors, while retaining control of quality assets.
“In the current exit environment, it’s often a case of either extending the fund life, or rolling into a continuation vehicle (CV),” says James Hamelin, Director, Institutional Banking at RBS International. “If investors aren’t getting their capital back from older vintages, they can’t commit into the latest vintage, and that stagnation is having a real impact. While extending the fund life enables you to continue holding the assets you don’t want to dispose of yet, the CV also allows for the recycling of capital.”
Another trend gathering attention – though with some scepticism – is the rising use of Net Asset Value (NAV) financing. While media headlines suggest it is becoming a go-to financing solution, the reality may be more measured.
“NAV financing is not a new concept” says Parin. “However, it’s undoubtedly gathered more focus in recent years driven by a slowdown in fundraising and exit activity. Whilst the strategy presents certain risks, these are well understood by managers, investors and lenders, who ensure adequate protections are built into NAV facilities. The growing interest in NAV financing reflects how private equity is adapting its toolkit to navigate a more challenging and constrained environment.”
James agrees: “There’s definitely a lot more interest, and more conversations around NAV financing, but it’s still more exploratory than action-oriented in most cases. It’s being used, but not to the extent that might be suggested.”
Some firms, like 17Capital and S&P Global, have been very vocal about their growth expectations for NAV lending. For instance, 17Capital has predicted a market growth from $100bn in 2023 to $700bn in 2030.
Others are more reserved however, and point to the divergence between levels of NAV lending activity amongst the largest managers and the midmarket, suggesting that the appetite for NAV lending will take time to mature across all fund types.
Another noteworthy trend is M&A and consolidation among GPs. With market access becoming more difficult, joining forces has become an appealing strategy. “GPs are consolidating to get exposure to different asset classes and access new investor networks,” explains James.
This trend is not just about capability expansion but also fundraising reach, he says. “New partnerships can open doors to new sources of capital. It’s a smart way to stay resilient in a fragmented market.”
Sector opportunities
While secondaries, driven by liquidity needs and strong demand, are a definite bright spot, other sectors are showing strong performance, with some also showing potential for future growth.
Tech and business services are performing well, often with competitive bidding for quality assets, and defence is growing, driven by increased European spending. Private credit is also gaining traction and new alliances are emerging, such as the recently announced partnership between Blackstone and L&G.
Although real estate has been underperforming for some years – especially in traditional assets like retail and offices – the growing demand for data centres could provide new opportunities for investors, as the expansion of AI accelerates.
But although new opportunities are emerging, funds are unlikely to stray far from the investments they are skilled in managing, predicts James. “I think funds will tend to specialise and continue to focus on what has got them to where they are,” he says.
As the market continues to find its footing, fund managers are adapting and evolving their strategies, employing flexible structures, and responding to LP needs and macro signals.
“The market is almost in a holding pattern,” James says. “But where there’s dislocation, there’s also opportunity — and that’s what good managers will continue to focus on.”
As a banking partner reach out to your relationship team if you wish to discuss how we may support you further.
Posted in:
Keywords:
Latest insights
How fund managers stay resilient
After years of turbulence, fund managers are adapting with resilience and strategy to a complex alternative investment landscape.
25 Sep 2025
Closed vs Open-Ended Fund Trends
Fund structures are evolving as managers balance closed-ended stability with open-ended liquidity to meet investor demand.
18 Aug 2025
Navigating changing regulations
As the financial services industry moves through a period of regulatory transformation, it’s critical for banks and AIFs to stay ahead of the curve.
23 May 2025