Private equity mid-year outlook

The private equity industry doesn’t like uncertainty. Financial models must be re-calibrated, new discussions are warranted, and buyers and sellers might view an asset’s future value (and current price) differently. But geopolitical conflicts, tariff turbulence, interest- and inflation-rate volatility and AI as a disruptor indicate that economic instability is here to stay. Private equity is slowly learning to live with this.

Uncertainty is challenging and adjusting to changing conditions takes time. This is reflected in reduced new transactions, exits and fundraising across private equity, which have reverted to levels similar to those seen in 2020.

But unlike the post-pandemic bounce back, the current recalibration seems slower. In these periods, private equity investments require patience, good judgment and steady hands. And because returns historically rebound after challenging periods, these are arguably some of the best periods in which to invest.

For long-term investors, this is positive news: future returns will depend on your investment strategy’s consistency and a diversified mix of managers and investments across different vintage years. We believe investors should focus on maintaining their investment strategy and sticking with skilled managers who know their industries well and can deliver value through operational business improvements. 

We’re also positive on increasing allocations to secondaries and co-investment funds in a controlled way. In a market where investors and private equity funds are willing to forgo future value to generate liquidity today, secondary funds can capture this illiquidity premium. Co-investment funds are also likely to perform well, as primary funds look for trusted partners for their best companies but can be subject to concentration risk.

While uncertainty continues to weigh on private equity, it’s also creating opportunities for patient, disciplined investors. A consistent long-term strategy, backed by skilled managers and selective exposure to areas such as secondaries and co-investments, should leave investors well placed to benefit as markets adjust to ongoing economic instability.

If you’d like to chat through the outlook for private equity and the implications for your portfolio, please get in touch.

Important information

This communication has been compiled by Hymans Robertson LLP® (HR) as a general information summary and is based on its understanding of events as at the date of publication, which may be subject to change. It is not to be relied upon for investment or financial decisions and is not a substitute for professional advice (including for legal, investment or tax advice) on specific circumstances.

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