The tariff policy escalations at the start of Q2 2025 by the current administration have shaken global markets and raised uncertainty to historically high levels. The resulting policies negatively impacted liquidity, while the decline in equity and fixed income markets also led to the denominator effect in asset allocators’ portfolio. The ever-changing narrative on tariffs has been front and center, effectively diminishing some of the tailwinds (lower interest rates, deregulation, improved activity) behind private markets, and exacerbating existing difficulties. As a result, inflation is anticipated to increase while the magnitude and pacing of interest rate cuts in the United States have become less clear, leading markets to price in slower growth. Moreover, the current administration’s unprecedented focus on nonprofit and educational institutions’ tax-exempt status has increased the demand for liquidity in an already challenging environment. Nonetheless, dislocations have occurred throughout history and are unlikely to cease in the future. A component of expected returns in private markets includes the liquidity premium, which we believe still holds for long-term investors. As such, we recommend staying the course and continuing to diversify private market allocations across vintage years and other areas of opportunity across private asset classes.

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