Summary & Outlook

Overall, 2025 private equity activity showed strong headline momentum, supported by increased deal and exit activity. However, this was offset by extended holding periods, concentration in megadeals and top managers, and continued liquidity constraints.

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As private equity portfolios become more mature, sellers will have to generate liquidity through exits, albeit likely at lower-than-expected exit multiples and valuations. With potentially lower exit valuations, we are optimistic that 2025 vintages may outperform the 2021-2024 vintages in gross IRR, aided by potentially favorable entry pricing (as buyers) and declining rates.

We believe 2026 may mark the beginning of a more durable recovery. GPs entered the year with optimism, which may have been tempered by exit backlog, AI fears, and geopolitical uncertainty. On the positive side, we believe lower rates and booming corporate M&A, as evidenced by the recent Netflix / Paramount bidding war for Warner, should facilitate deal making and exits.

Overall, we believe private equity managers with differentiated and patient investment strategies, experience and knowledge across macroeconomic cycles, and the ability to drive operational improvement would have an edge in this maturing industry.