Lower rates, larger deals and secondaries momentum point to gradual private equity recovery
Private equity is expected to enter 2026 in recovery mode rather than rebound, as easing interest rates, stabilizing valuations and renewed investor conviction slowly unlock activity across global markets.
Preqin’s Private Equity in 2026 report says that the industry is emerging from a prolonged slowdown driven by a backlog of unsold assets built up during the deal-heavy years of 2021 and 2022. Higher financing costs and valuation gaps between buyers and sellers have constrained exits, extending holding periods and suppressing distributions to investors. While exit volumes remain muted, the new report notes that average exit sizes have increased, signaling that capital is beginning to move again.
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Deal making in 2025 showed early signs of stabilization with aggregate deal value in the first three quarters reaching roughly 82% of the full-year total for 2024, supported by a shift toward fewer but larger transactions. Established managers with deep capital reserves and strong lender relationships have increasingly focused on high-conviction deals, while smaller firms face a more challenging environment.
Global private equity fundraising totaled US$507 billion through the first three quarters of 2025, tracking close to 2024 levels. Secondaries funds captured a record share of capital, reflecting investor demand for liquidity and shorter-duration strategies in a constrained exit environment. At the same time, first-time fund managers accounted for a historically low share of capital raised, highlighting heightened selectivity among LPs.
Despite near-term caution, long-term confidence in private equity remains intact with Preqin’s investor surveys showing that most allocators plan to maintain or increase exposure over time, even as concerns about exits persist. The firm expects fundraising momentum to accelerate from 2027, with total capital raised projected to surpass its previous peak by 2030.
Looking ahead, Preqin forecasts private equity assets under management to approach $12 trillion by the end of the decade.
Performance, however, is expected to moderate, with forecast internal rates of return below those achieved in the low-rate period prior to 2024. As a result, value creation is increasingly tied to operational improvements, disciplined capital deployment and manager selection rather than financial engineering.
