Are Investors Still Happy With Private Equity Performance?

Private Equity Investor Satisfaction Then and Now

Private equity thrived during a record decade. This was the time when the US enjoyed its longest economic expansion, lasting from 2009 to 2020.  Private equity performance consistently eclipsed the public markets, and private equity investors contributed more capital than ever.

The 2019 Global Private Equity Report by Bain & Company revealed a year-after-year increase in deal value from 2014 to 2019. This growth came from strong investor interest, active equity markets, low interest rates, and steady GDP growth in the US and Europe. Then, the turmoil and uncertainty of 2020 rocked the markets, causing many PE firms to pivot their strategy.

Private markets bounced back quickly after a short pause in early 2020. This led to a remarkable 2021, with investments exceeding one trillion dollars, as noted in a 2022 S&P Global report.

However, as the Fed raised interest rates repeatedly to combat inflation, private market deals plummeted in the second half of 2022. According to a McKinsey and Company report, 2022 was a record year for private equity activity and perhaps the second-best fundraising year ever. Still, global PE performance shrank for the first time since 2008. The decline in public market portfolios caused the denominator effect for many investors, and some began pulling back on future commitments to rebalance their portfolios.

But when the Fed kept raising interest rates to fight inflation, private market deals dropped sharply in the second half of 2022. This shift in monetary policy had a ripple effect across the investment landscape. According to McKinsey & Company’s Global Private Markets Review 2025, global private equity fundraising declined for the third consecutive year in 2024, falling 24% year-over-year. However, the report also notes a rebound in deal activity, which rose 14% to over $2 trillion, marking the third-highest level on record. Many limited partners stayed cautious, even after the turnaround. They mentioned ongoing macroeconomic challenges. They also noted liquidity issues and uncertainty about when to exit. In 2024, LPs saw distributions surpass capital calls for the first time since 2015. This change brought relief after years of negative cash flows. It also sparked some cautious optimism in the market.

The 2025 S&P Global Market Intelligence outlook echoed this mixed sentiment. At the same time, many investors and general partners remained optimistic about long-term value creation. Nearly one-third of GPs surveyed expected deal activity to decline soon. Concerns over valuation mismatches, prolonged holding periods, and rising costs were key barriers to acceleration.

With continuing global economic uncertainty, market volatility, and persistent pressure on fundraising and exits, the question remains: are private equity investors still satisfied with their returns?

What Private Equity Investors Said Then

In 2016, Financial Poise shared results from a Preqin survey. The survey asked if 2015 private equity performance met investor expectations. At that time, 94% said their investments had met or exceeded their expectations, and more than half planned to contribute again in 2016.  Some investors expressed growing concern over management fees, unattractive terms, pricing, valuations, or transparency.

The 2019 Preqin survey saw similar results, with 93% of investors pleased with their investments’ performance. Investors weren’t worried about portfolio performance. They were concerned that the increase in capital and dry powder would far exceed the number of deals. Competition was cited as one of the main challenges in private equity and ultra-high valuations. Nearly 75% of investors said they’d commit funds again in 2020.

More recently, Preqin’s 2024 private capital investor outlook shows a slight dip in satisfaction amid ongoing macroeconomic uncertainty, but private equity remains one of the highest-rated asset classes among institutional investors. About 82% of investors were happy with PE performance last year. Also, 68% planned to keep or raise their allocations in 2025. Concerns about valuations, exit timelines, and rising interest rates are making investors hesitant.

An Evolving Market

Since the beginning of the decade (and the 2016 survey), much has evolved in private equity, especially as experts monitor economic downturns.

Fund managers faced a tough time in early 2020. They then enjoyed a great year in 2021. However, late 2022 brought a decline. In 2023 and 2024, they focused on adjusting their strategies. They had to deal with ongoing inflation, high borrowing costs, and global instability.

By early 2025, many private equity firms became more selective. They focused on creating operational value and specialized in certain sectors. Even with challenges, investor interest stayed strong. This was due to lasting confidence in the asset class and plenty of funds ready to be used.

Bain & Company’s 2025 Global Private Equity Report highlights a cautiously optimistic outlook for the industry, noting a rebound in dealmaking activities. The report emphasizes that “dealmaking is up, exits are up, and conditions at the macro level are stabilizing.”  This optimism reflects a broader belief that firms focusing on fundamentals, innovation, and long-term value are best positioned to navigate the current landscape

What Private Equity Investors Say Now

How are investors feeling as we move further into 2025? How did they view private equity performance over the past two years, and what do they expect moving forward?

According to Preqin’s 2024 Global Private Equity Report, investor sentiment remained cautiously optimistic heading into 2025. Despite macroeconomic uncertainty and high valuations, 84% of investors plan to keep or boost their private equity commitments over the next year. This is a small drop from 85% in 2023, but it still shows strong long-term confidence in this asset class.

Preqin also notes a growing interest in sector-focused strategies and secondaries as investors seek to mitigate volatility while capitalizing on more targeted opportunities. Most LPs still view private equity as crucial for diversifying their portfolios. They believe it helps generate long-term returns. This remains true even with tighter liquidity and fewer exits recently.

Future Private Equity Performance Expectations

J.P. Morgan Private Bank sees reason to be opportunistic about the future of private equity funds, citing “fresh opportunities arising in private markets this year as volatility continues and valuations get more attractive.”

J.P. Morgan Private Bank expects good returns from new funds and emerging opportunities. History shows that “Managers who start funds during tough times often perform better.” However, the bank recommends that new investors should use a balanced and diverse strategy. This means considering factors like strategy, asset class, investment year, manager, and geography.

The private equity secondary market is anticipated to experience significant growth in the coming years. According to a recent report, global alternative assets are projected to continue their upward trajectory, with private equity assets expected to reach $12 trillion by the end of 2029, up from $5.8 trillion at the end of 2023, making it the largest component of the global alternatives market. This expansion underscores the increasing role of secondary transactions in providing liquidity and portfolio diversification for investors.

While many PE investors hang in there, it doesn’t mean they’re not cautious about future private equity performance.

The Goldman Sachs Public Pension Quarterly Snapshot reported a continued decline in return assumptions for public pensions, with many plans lowering their forecasts again heading into fiscal year 2025. Public pension funds remain cautious amid persistent inflationary pressures and uncertain market dynamics. This shows they believe in these assets’ long-term returns, even with ongoing short-term volatility. This trend shows that institutional investors are looking for yield and diversity. They want to adapt to the changing economy.

Many experts are still optimistic about private equity this year. They see potential, even with the risks and uncertainty in the economy. Emerging opportunities, the large nest egg of dry powder, and PE valuations are becoming more attractive.

General partners are managing imbalances, economic ups and downs, rising costs, and cash shortages. They aim to improve the long-term outlook.

Many experts, including Pricewaterhouse Coopers, say investors can expect a focus on investments with sustainable development, such as digital and talent transformation and ESG (environmental, social, and governance) initiatives.

We think you’ll also like:

1. What Is ‘Free Enterprise’?
2. National Financial Literacy Month: Numbers Make the Case
3. The Importance of an Integrated Financial System

[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Property/Business Interruption and Cyber Liability
2. Raising Capital: Negotiating with Potential Investors
3. Blockchain and Smart Contracts

This article was originally published on March 17, 2016 and updated on August 2, 2023.]

©2025. DailyDAC^TM, LLC d/b/a/ Financial Poise^TM. This article is subject to the disclaimers found here.