Investors struck an optimistic note at the end of last year, with findings from Private Equity International’s LP Perspectives 2025 Study revealing an uptick in performance expectations and appetite for the asset class.
As we approach the end of 2025, such expectations haven’t exactly come to pass. As many as 36 percent of LP respondents reported that PE investments fell below benchmarks in the 2025 study, but only 10 percent expected it would happen again in the following 12 months. Now though, 46 percent of LPs polled for the 2026 study say PE investments missed benchmarks over the past year, and 31 percent anticipate that will continue.
Despite this, there are bright spots for the industry, as LPs endeavour to explore opportunities presented by geopolitical shifts, burgeoning fund structures and changing market dynamics. PEI’s LP Perspectives 2026 Study explores investor sentiment at another potential turning point for the asset class.
1 Back for more
On a positive note, 38 percent of LP respondents are still planning to increase private equity spend despite the industry’s well-reported challenges. However, that number comes in lower than last year’s 45 percent. This decline ends a sustained three-year uptick from a low point in 2023’s survey, when only 28 percent planned to invest more in private equity. Exactly half of LPs plan to hold steady with allocations, which is a figure that has only wavered slightly throughout the survey’s history.
2 Pressure gauge
An exit impasse has led to uneven distributions back from managers, hamstringing investors’ capacity to redeploy capital. Selling stakes on the secondaries market is one way capital-constrained LPs are seeking to address liquidity issues, but others include urging GPs to generate distributions for earlier vintage funds. More than half of respondents are putting ‘some’ pressure on managers for distributions from such funds, with a further 17 percent applying ‘a lot’ of pressure.
3 Stiff competition
Fewer respondents are underallocated to private equity this year, according to the study, so it’s little wonder LPs are planning to be selective when deploying capital into private equity programmes. Emerging managers might be in store for some stiff competition too, as the proportion of LPs expecting to add new managers to the mix has fallen 3 percentage points year-on-year. Notably, only 9 percent of LPs prefer to invest with small and emerging managers over mid-sized and large managers, based on another data point from the survey.
4 GP stakes falls foul of fundraising
To say fundraising has been challenging may be an understatement. Global PE funds raised $569.5 billion in the first three quarters of this year, per PEI data, down from $727.9 billion in Q1-Q3 2024. The proportion of respondents that are at least a little worried about how such a constrained environment for fundraising might come to bear on returns from GP stakes funds doubled over the past year, from 35 percent to 71 percent.
The proportion of LPs not at all worried fell starkly, from 60 percent to 24 percent.
5 Fluid funds
PEI has previously reported that LPs have questions – as well as concerns – about the interplay between traditional funds and semi-liquid, or evergreen, vehicles. But there’s no question those vehicles are growing in prominence, and they are appealing to institutional investors as well as the private wealth market. As to why that is, about a third of LP respondents are lured by the operational simplicity of these funds, while others appreciate the increased liquidity (24 percent) and the lower J-curve exposure (22 percent).
6 Risky business
When it comes to all the investment dollars flowing into AI, a third of LP respondents have taken a generally positive view of GPs using the technology to bolster operational efficiency in-house – and practically no LPs have a negative view of it. Yet with the potential applications perhaps still being fuzzy and a lot remaining unknown about the scale of the risks AI could pose, 46 percent of LPs come away with mixed feelings about this new development.
7 Stick to your guns
Donald Trump’s return to the White House in January renewed debate about whether anti-ESG attitudes would alienate those investors – at least in the US – that prioritise climate change. The single-digit percentage shifts in responses here partly illustrate what our colleagues at affiliate title New Private Markets found in a series of interviews with sustainability professionals this summer; in the face of pushback, investors are not massively changing their priorities.
