The red leather and mahogany interior of the UBS Preview Club in Union Square offered a fitting backdrop for a recent discussion on the nuanced state of private equity. As industry professionals gathered to dissect PitchBook’s 2026 Private Equity Outlook, a clear dichotomy emerged: while certain segments signal recovery, others continue to grapple with persistent hurdles. This complex landscape suggests that the sector is far from a uniform rebound, presenting both opportunities and significant tests for firms navigating the coming years.
One of the most encouraging signs for the private equity market is the marked increase in exits. According to PitchBook’s latest data, 2025 is projected to be the second-best year on record for exits, surpassed only by the exceptional year of 2021. This surge translates to over 1,600 exits, collectively valued at nearly $730 billion. Kyle Walters, a private equity research analyst at PitchBook, emphasized the importance of this momentum. He noted that many sponsors had opted to remain on the sidelines, patiently awaiting a more favorable exit environment. Their patience now appears to be paying off, providing a much-needed release for capital that had been tied up. However, Walters cautioned that sustaining this momentum will be crucial to truly compensate for the stagnant periods experienced from 2022 through 2024.
Conversely, the fundraising landscape tells a different story, one of contraction. 2025 registered as the weakest year for capital formation since 2020, a trend Walters characterized as “the success of the few and the challenges of the many.” This disparity highlights a tightening environment where only a select group of firms are successfully raising new funds, leaving many others struggling to attract fresh capital. Despite the improving exit figures, a substantial number of private equity-backed companies are reaching maturity, necessitating an exit to allow their backers to initiate subsequent fundraising rounds. Unlike venture capital, private equity models are not typically designed to absorb widespread failures, meaning even a single default can severely impede a smaller firm’s ability to raise its next fund.
Sector-specific challenges further complicate the overall picture. Ron Kahn, a managing director at Lincoln International, pointed to areas like software, where annual recurring revenue (ARR) is not materializing as initially anticipated. This underperformance could lead to re-evaluations and adjustments within portfolios heavily invested in the tech sector. Another area under close watch is power and energy. Kahn described this sector as potentially “binary,” suggesting it could yield either substantial gains or significant losses. He observed that considerable bets have been placed on power and energy assets, and the ultimate outcome remains highly uncertain, indicating a high-risk, high-reward environment.
The current environment, therefore, demands a discerning approach from private equity firms. While the uptick in exits offers a glimmer of optimism and a chance to return capital to limited partners, the concurrent difficulties in fundraising underscore a more competitive and selective market. Firms must demonstrate strong performance and clear pathways to liquidity to stand out. The coming months will likely test the resilience and adaptability of many private equity players, as they navigate a period defined by both renewed opportunities and persistent structural headwinds.
