Private Equity International: What GPs expect from private equity in 2026

Private Equity International

A new hope: What GPs expect from private equity in 2026

After a challenging year marked by subdued fundraising, tariff volatility and a backlash against various initiatives in the world’s largest private equity market, one could forgive GPs for setting expectations low for the 12 months ahead.

This has turned out to be far from the case. At the end of 2025, Private Equity International canvassed private equity managers to gauge their sentiment for 2026. Generally speaking, the outlook was positive. For the most part, GPs expect the liquidity jam to finally dissolve in 2026.

“I believe we’re headed into a blockbuster year for dealmaking.” said Tyler Wolfram, Managing Partner at Oak Hill Capital.

Kalyani Harar, Director of Private Investments at Wellington Management, added: “I don’t want to jinx anything, but there are a lot of companies that are looking for that additional liquidity and that are ready to go to market.”

William Benjamin, Head of Alternative Solutions at HSBC Asset Management, noted: “After a period of being somewhat overlooked, private equity is entering 2026 with renewed momentum. Exit backlogs are easing.”

Benjamin added that factors including “modest” Fed rate cuts, lessening tariff uncertainty, growth in secondaries and improving IPO markets are underpinning a prolonged recovery in exits and distributions.

Of course, many GPs went into 2025 with similarly high hopes, telling PEI at the time that dealflow pipelines would become unclogged over the course of the year. This proved not to be the case, with a series of macro economic shocks spooking the market on multiple occasions. A little optimism is never a bad thing, however, and market sources believe dealmaking and fundraising could prove mutually catalytic.

“LPs are demanding realisations before committing to new funds, which means GPs will need to get back into market – and that simply isn’t possible without selling,” said Oak Hill’s Wolfram. “While GPs may take slightly less on individual deals, we believe doing so unlocks the ability to raise the next fund.”

According to PEI’s Fundraising Report Q3 2025, private equity funds continued their years-long struggle in 2025, raising only $577.7 billion in the first three quarters. In 2026, some GPs believe this trend may reverse.

Xavier Robert, Partner and CIO of PEI Group owner Bridgepoint, expects a “reordering of the PE landscape” as firms try to raise their latest fund since the 2020-21 fundraising boom. Outperformance, however, maybe limited to those who have proven themselves through the tough times.

“Managers with a good track record of exits and cash returns will raise,” said Flor Kassai, Managing Partner and Head of Buyout at Inflexion. “Those with limited liquidity and heavier reliance on valuation marks will find fundraising materially more difficult, and will increasingly rely on fund extensions, asset transfers and smaller vehicles to remain active.”

“We’re now seeing a healthy shakeout,” added Michael Choe, Managing Director and CEO of Charlesbank Capital. “The firms that will come through it strongest are the ones focused on the basics – building better companies and driving real enterprise value, nothoping for multiple expansion to do the work for them.”

Driven by innovation

Several trends could shape fund inflows in 2026. For one, unstable tariff policies last year created a touch of uncertainty around the US, which could result in Europe seeing increased activity moving forwards.

“The geographic narrative is shifting,” said Andrew Sibbald, Head of Europe at Warburg Pincus. “LPs remain committed to the US, but are reassessing allocations and recognising Europe’s potential. As a result, I expect Europe to see growing interest in 2026 and beyond.”

Nikos Stathopoulos, Europe Chairman at BC Partners, concurred, noting that Europe – and, in particular, the European mid-market – stands out as a relative safe haven. “It’s a complex yet attractive environment that offers tangible, real-economy opportunities in high-quality companies and sectors for investors with the expertise to navigate it.”

Artificial intelligence, meanwhile, is shaping investment activity, with first movers in the space standing to enjoy a headstart in 2026.

Henry Frankievich, Managing Director at Insight Partners, said: “AI transformation will become an essential part of the value creation playbook. Valuation gaps between AI haves and AI have-nots will only widen.”

Some GPs, however, warn that AI should only be approached with a solid investment strategy, rather than just a fear of missing out.

“AI is profoundly changing the world, but valuations for first derivative AI bets are reminiscent of the dotcom bubble,” noted Eric Zinterhofer, Founding Partner of Searchlight Capital. “PE firms that embrace AI to transform traditional sectors, rather than trying to pick AI-platform winners, should outperform over time.”

Likewise, Rob Heyvaert, Founder and Managing Partner of Motive Partners, said: "Firms that understand AI infrastructure as a strategy will outperform, while those chasing optics over operating systems will stall."

As in prior years, it is impossible to know what the coming months will hold. It’s reassuring, though, that in spite of ongoing difficulties, GPs are looking ahead with optimism.