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The Cycles in Private Equity

March 1, 2026 | Commentary

  • After three years of trailing the returns of public equity, private equity markets have been put under the microscope questioning whether they should continue to be major parts of diversified portfolios.
  • The large public equity declines in 2022 stopped an overactive private equity industry in its tracks. Activity in all stages of private equity from venture to buyout to crossover slowed dramatically but have recently recovered, demonstrating their important role in the capital formation process.
  • Just because there are lags and less transparency in valuations for private partnerships does not mean that cycles don't exist. These features may have led to more extremes in investor behavior, often leading to disappointing results.
  • Private equity should be expected over time to continue to provide incremental returns over public markets, but not in every quarter or year. In determining the right allocation to private equity, investors should first ensure that spending needs are met in all environments by holding adequate liquid investments.

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