Key takeaways
PE is in a better position than it was a year ago, but still faces pressures to clear ageing portfolios, increase distributions to investors and get fundraising capital flows moving again.
Looking ahead to 2026, there are four key factors that will drive progress for firms:
Exit optionality Traditional exit channels are showing signs of gradual thawing, but GPs will have to continue to make use of GP-led secondaries, CVs and NAV financing to complement rebounds in M&A and IPO markets.
Tapping non- institutional investors The industry is getting better at finding ways to tap into the non-institutional investor market, whether through semi-liquid fund structures, evergreen funds or leveraging private banking
platforms. The emergence of non-institutional capital as a credible and accessible source of funds for PE could not be timelier, given the constraints facing institutional investors. Managing a large number of non-institutional investors writing smaller checks, however, will be more challenging than managing a handful of institutions writing big ones. Cracking the non-institutional market will depend on operational muscle as much as investment excellence.
GP-led secondaries deals are now a permanent fixture of the market, and GPs cannot afford to ignore the flexibility and liquidity these deal structures offer. Similarly, GPs will fall behind their peers if they do not take advantage of the capital that NAV finance can inject into funds that have passed their investment periods but still hold attractive assets that require financing. Unblocking the liquidity logjam and improving DPI remains the single biggest priority for the PE industry. GPs in sales mode Scale is becoming more and more important for firms as the industry faces closer regulatory scrutiny, higher investor expectations and the complexities that come with running non-institutional money. This is already driving a wave of GP consolidation and third-party investment in GP management companies. Expect more GPs to either explore mergers with other firms or to take on third-party minority investment to bring in the capital and support to level up operational capabilities.
Private credit plays Private credit is evolving and
expanding to provide GPs with a wider set of debt products that can be tailored to meet bespoke financing requirements. The private credit offering has expanded beyond direct lending to finance deals and now includes junior debt capital, recurring revenue loans and a mixture of structured debt and asset- backed products. Expect PE firms to make full use of these options, and to mix and match different debt products to optimize capital structures.
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