For decades, the default path into private markets was simple: commit capital to a fund, trust the manager, and wait. Today, that model is increasingly being questioned. Across venture capital, private equity, and even real assets, a growing number of sophisticated investors are stepping away from blind-pool funds in favor of deal-by-deal investing.
This shift is not ideological. It is structural, driven by changes in market volatility, valuation dispersion, liquidity constraints, and investor expectations around control and transparency.
The cracks in the traditional fund model
The traditional fund structure made sense in an era of abundant liquidity and rising markets. Managers deployed capital quickly, valuation risk was masked by multiple expansion, and time smoothed out mistakes.
That environment no longer exists. Higher interest rates, slower exits, and compressed multiples have exposed the weaknesses of blind-pool investing:
- Capital is locked for 7–10 years with limited visibility
- Investors commit before seeing actual assets
- Return dispersion between top and median managers has widened
- Underperforming deals are harder to hide in flatter markets
What deal-by-deal investing actually offers
Deal-by-deal investing flips the traditional power dynamic. Instead of committing capital upfront, investors evaluate and opt into individual transactions. The appeal is straightforward:
Deal-by-deal investing gives investors a higher degree of precision and control over capital deployment. Rather than committing to a blind pool, investors can selectively deploy capital only into opportunities that meet specific return targets, risk profiles, or thematic priorities. This approach also increases transparency, as investors evaluate the underlying asset, valuation, deal structure, and downside protections before committing capital. Portfolio construction shifts from the fund manager to the investor, allowing exposures to be built intentionally rather than by default. Importantly, capital remains liquid until conviction is high, providing timing flexibility in volatile or valuation-sensitive markets.
Valuation dispersion is driving behavior
One of the most powerful forces behind the shift is valuation dispersion. In private markets today exceptional assets still command premium pricing, average assets struggle to clear rounds, exit multiples vary dramatically by sector and timing.
Deal-by-deal structures allow investors to concentrate exposure in high-conviction opportunities while avoiding marginal deals included in funds for deployment discipline rather than merit. In other words, investors want to own fewer, better assets — not broader exposure at any cost.
Liquidity constraints are changing preferences
Many LPs are already overallocated to private markets due to slower exits and longer holding periods. This “denominator effect” has made long-dated fund commitments harder to justify.
Deal-by-deal investing offers shorter duration exposure, more predictable capital calls, reduced J-curve impact and greater alignment with cash-flow planning.
For family offices, HNW investors, and smaller institutions, flexibility now outweighs theoretical diversification benefits.
Technology is enabling the shift
Ten years ago, deal-by-deal investing was operationally painful. Today, platforms, SPVs, and digital deal infrastructure have lowered friction dramatically.
Investors can now review deals asynchronously, participate through streamlined SPVs, access institutional-grade reporting and co-invest alongside experienced sponsors without full fund commitments. This has democratized access while increasing efficiency, making deal-level discretion scalable.
Managers are adapting or being forced to
General partners are feeling the pressure. Some are embracing hybrid models. Smaller core funds paired with deal-by-deal co-investments, anchor LPs with opt-in rights, transaction-specific vehicles for larger or more complex deals and others resist, often at the cost of slower fundraising.
The shift reflects a deeper truth: capital is becoming more selective, not scarcer. Investors are willing to deploy, but only when risk, structure, and pricing align.
The trade-offs investors must accept
Deal-by-deal investing is not a free lunch. It requires more time and analytical effort, strong sourcing and underwriting discipline, willingness to forgo automatic diversification, acceptance that access, not capital, is the true constraint.
For investors without deal flow or evaluation capability, funds still make sense. But for those with expertise, networks, or thematic focus, blind pools increasingly feel inefficient.
The bottom line
The shift away from traditional funds isn’t about rejecting professional managers, it’s about gaining more control. In uncertain, valuation-sensitive markets, investors want to know what they own, decide when to deploy capital, and clearly understand how returns are generated.
Deal-by-deal investing offers that clarity. It allows investors to commit capital with intention rather than obligation, and to align risk, timing, and conviction more closely. Private markets aren’t becoming fundless, but they are becoming far less blind.
Published by Samuel Hieber
