The most sophisticated investors on both sides of the Pacific told us this week what they value most right now, and it is not the next model. It is the ability to change their minds. They are not retreating from AI. They are paying to keep the door open.
On October 7, at the Milken Asia Summit in Singapore, Temasek's chief investment officer Rohit Sipahimalani said about half of Temasek's AI exposure sits in public markets, and "we want to increase that number ideally to 70% to 75% so it gives us more flexibility to pivot with changes in the environment, as against being stuck with a private asset which there's little you can do when things are changing." He called an unwinding of the AI trade "the biggest risk," said Temasek does not see it as imminent, and allowed that there could be bumps in 2027. This is not a retreat. In July, Temasek said it aims to more than double AI from 6 percent of its portfolio to up to 15 percent by 2031. What is changing is the mix: more AI, held in a form it can sell.
The same week, the PitchBook-NVCA Venture Monitor showed American LPs making the same trade with different instruments. Established firms, those on fund four or later, took 88.2 percent of US venture capital raised this year, the highest share in PitchBook's data, and PitchBook says that preference "largely reflects liquidity constraints." The number of emerging firms closing a fund fell from 927 in 2022 to 211 through the third quarter. First-time funds raised $4.9 billion across 81 vehicles. The top line looks like a boom: a record $515.8 billion of deal value with AI at 82.7 percent of it. PitchBook's Nizar Tarhuni was blunt about what sits underneath: "for most of the market, the liquidity won't show up." On Forge, shares of companies that last raised in 2021 trade at a median 59 percent discount.
Put these together and the story is not that LPs have soured on AI. They are buying optionality wherever they can find it. Temasek finds it in listed stocks. US LPs find it by recommitting to managers who have already sent cash back, on the theory that a firm that distributed once can do it again. The pattern runs beyond venture, too. In private equity, the most patient institutions are selling to get it: Yale was reported in September to be selling about $1 billion of fund stakes, and HarbourVest was reported on October 1 to be buying roughly $1 billion of fund interests from GIC.
I think this is rational, not panic. When the technology moves this fast, the cost of being locked in rises. A private position you cannot exit is a bet that the world you underwrote will still exist when the position matures, and in AI that world can change inside a single fund cycle. So the premium for holding illiquid private assets has to be higher than it used to be. Most managers cannot show that it is. That is the uncomfortable conclusion inside the 88 percent. Capital is not being allocated by manager quality. It is being allocated by liquidity, and those are not the same ranking.
That should change how everyone on the chain behaves. Founders should drop the assumption that their investors are happy to hold for ten years. Build a cap table that is ready for secondaries, and have a tender-offer plan before someone asks for one, because early holders who cannot get out will eventually act like it. GPs should treat a credible path to returning cash early, through continuation funds or structured secondaries, as part of the product, and the LPs underwriting them should pass on funds whose only exit is an IPO window that, in Tarhuni's telling, keeps slipping further out.
In the US, LPs should be honest that an 88 percent allocation to established managers is a liquidity bet, not alpha selection. Emerging-manager terms are at their best precisely when that cohort is starved, so a disciplined small allocation now is worth protecting. In Southeast Asia the lesson is sharper. Temasek is the allocator this region watches most closely, and if it wants the freedom to pivot, the funds that grew up in its ecosystem should build the exit door into the fund design: secondary programs, explicit DPI targets, continuation options. Family offices committing to regional funds should ask to see that plan before they sign.
Everyone is paying for the exit door. The managers who build one will be the ones who get paid.