When even Yale and Harvard start to 'cut losses' and sell private equity assets, is the market really about to change? A chain reaction driven by tight liquidity, huge unpaid commitments, and policy pressures is quietly unfolding.


Just after Yale University was exposed for planning a large-scale sale of its private equity portfolio, Harvard's endowment fund, which manages assets up to $53 billion, quietly joined this 'sell-off wave'.


According to media reports, Harvard is collaborating with investment bank Jefferies to plan the sale of its private equity assets valued at around $1 billion to the secondary market giant Lexington Partners. Although negotiations have not finalized the terms, it is reported that they are now in the final stages.


Lexington, as a subsidiary of Franklin Templeton, just completed a $22.7 billion fundraising for its secondary market fund in 2023, making it a significant player in this field. This transaction may only be the 'preliminary battle' of the private liquidity crisis, the tip of the iceberg.



01 The liquidity dilemma under 'delayed returns' in private equity


According to Harvard's latest annual report, as of June 2023, as much as 40% of its assets are bet on illiquid areas like private equity. Therefore, when these projects stagnate at the exit end and cannot be smoothly realized, the endowment fund immediately reveals cash flow pressure.


Particularly concerning is that, according to disclosed data, as of June 30, 2024, Harvard still has about $12.4 billion in unpaid investment commitments, which means any future round of capital calls will test its liquidity baseline like a 'ticking time bomb'.


Not only Harvard, but Yale's actions also validate that the entire private equity ecosystem is facing a winter. It is reported that Yale University is working with Evercore on managing up to $6 billion in private equity transfers. Behind the large-scale secondary market transactions is actually a 'self-rescue wave' among the LP (limited partner) community.



02 Multiple pressures combined: Trump's policies and political risks exacerbate the situation


Interestingly, Harvard's 'private equity sell-off' began even before the recent pressure from Trump’s policies. However, it cannot be denied that Trump’s recent pressures on higher education institutions, including the suspension of federal funding and threats of tax increases, are exacerbating the already high financial tension in universities.


In March, Harvard had to announce a hiring freeze, and this month it issued $750 million in bonds to supplement liquidity. This debt, coupled with ongoing bets in the private equity sector and frozen liquidity, undoubtedly makes its balance sheet more fragile.


In fact, starting from the end of 2024, the investment portfolios of U.S. universities' large-scale endowment funds have been listed by Wall Street as 'potential sources of systemic risk'. The high proportion allocated to private equity and venture capital, while yielding high returns during bull markets, has now turned into a huge funding black hole amidst the current backdrop of difficult exits and frequent discounted transactions.



03 A 'modern version' of the subprime crisis? Chain risks are accumulating


Comparing the exposure of endowment funds from top universities like Harvard and Yale to the subprime crisis is not alarmist. The current structure is very similar:


  • Assets are severely illiquid (a large amount invested in private equity and startups);


  • Liabilities could be called at any time (like capital calls);


  • Market sentiment has shifted, with severe pricing discounts on trades;


  • Dual pressures from policies and regulations interfere with capital arrangements.



What is even more alarming is that the assets sold by these universities are likely to be discounted and picked up by hedge funds, family offices, or even other VC institutions, leading to a chain reaction of valuation downgrades and negative expectations. Once prices collapse, it may trigger a larger 'sell-off wave' among LPs, creating a liquidity vacuum.


Just like the re-evaluation of CDO ratings during the 2008 subprime mortgage crisis led to a systemic market collapse, the private equity chain is currently facing a fatal risk of disconnection between valuation and reality.



04 Market outlook: Private equity faith is collapsing, technology-driven secondary funds may welcome dividends


Although we are still on the eve of a 'structural collapse' in the private equity market, it is worth noting that amidst valuation re-evaluations and liquidity dilemmas, technology-driven secondary market platforms for private equity will encounter significant opportunities.


AI-driven market research and on-chain data capture platforms like Mlion.ai have begun to integrate private equity, on-chain assets, primary market valuations, and risk indicators, providing users with real-time dynamic warnings for their investment portfolios through RAG algorithms.


As traditional LPs still rely on manual reports and semi-annual audit data, high-frequency, low-latency, and visual AI asset management assistance will become the 'new infrastructure' to navigate dark cycles.



Conclusion:


After Yale, Harvard is also selling. The exit signals from top universities are not just local adjustments of asset portfolios, but rather signals of potential 'systemic repricing' for the entire private equity ecosystem.


The domino effect of the 'new subprime crisis' may have already been gently pushed over.


And you, are you prepared to wait for dawn in the dark, or have you already begun to reconstruct your investment armament?



Disclaimer: The above content is for informational sharing only and does not constitute any investment advice. Please make rational judgments and operate with caution.