Private equity’s outlook still positive in the long term

Private equity has historically outperformed public markets. In your view, how has its role in institutional portfolios evolved?

Private capital is becoming a staple of institutional investors’ portfolios. Over the past 20 years, investors have increasingly seen the importance of private capital and the benefits it brings. Returns are likely the main driver, as private equity continues to outperform public markets. However, there are also important aspects for institutional investors such as the diversification benefits that private equity brings to institutional portfolios.

One example I like to cite is that in the US, the number of public companies has halved since the mid-1990s, resulting in a lower opportunity set in the public markets, but relatively higher growth potential in private markets.

Private equity is an asset class in which assets are held over longer time horizons, so it is important not to get distracted by short-term challenges. Evaluating returns over the next 2–5 years could be too short a window to see how much value private equity brings to a portfolio.

How does the current pipeline for private equity deals and exits look?

In terms of private equity deals, the first half of this year was challenging, particularly in the second quarter after the tariff announcements. But I think investors are becoming more comfortable with the current geopolitical environment, and have a better understanding of how tensions could affect global economies. In the US, there could be potential interest rate cuts in the fall, which could further support deal pipeline growth, particularly M&A. There are also signs of the IPO market restarting.

As for exits, private equity managers are coming up with creative solutions to return capital to investors or allow them to stay invested. So, there has been an increase in net asset value lending against portfolios to help return capital to invest, as well as continuation vehicles and secondaries.

What is your outlook for private equity fundraising in the long term?

The investors we speak to continue to see the value of private capital. A recent Preqin survey also highlighted that a large percentage of investors either plan to maintain or increase their allocations to private equity.

While there have been some challenges to fundraising due to exit difficulties and trouble cycling capital back to LPs, our view is that these challenges are short-lived. Eventually, as the exit market opens and capital gets distributed back to LPs, they will continue to invest in private equity funds. Private equity’s diversification benefits are still very attractive to LPs alongside the strong long-term performance compared to public markets.

Additionally, fundraising may benefit from a higher level of democratization in private markets. If access expands in appropriate ways with proper guardrails, more retirement savers can access the benefits that private markets bring.

About
Jamal Hagler serves as Senior Vice President of Research at the American Investment Council (AIC), producing reports on investment trends, fund performance, sector-specific investment, and returns to pension funds. The AIC is an advocacy and resource organization established to develop and provide information about the private investment industry and its contributions to the long-term growth of the US economy and retirement security of American workers.

This article originally appeared in Private Equity Q3 2025: Preqin Quarterly Update.

_{This is a sponsored opinion by the American Investment Council (AIC). The views expressed are provided as of November 2025, do not constitute an endorsement, recommendation, or any other advice, and are subject to change. The content does not necessarily reflect the views of BlackRock, Preqin, or any of its affiliates. The AIC is not affiliated with Preqin. Preqin received compensation from the AIC in exchange for publishing this content.}