Private equity is entering 2026 in a markedly different position from the rapid expansion years that followed the pandemic, according to Preqin’s Private Equity in 2026 report.

The asset class remains structurally attractive, but capital flows are increasingly governed by realised performance rather than fundraising ambition.

Preqin notes that fundraising conditions remain constrained as limited partners continue to manage denominator pressure and slower distribution cycles. While investor appetite for private equity has not disappeared, commitments are being channelled more selectively towards managers with established track records and evidence of realised exits. Re-ups are taking precedence over new relationships.

Exit conditions are expected to improve only gradually. Preqin does not forecast a broad reopening of IPO markets. Instead, it identifies sponsor-to-sponsor transactions and strategic sales as the most credible exit routes in the near term. Assets that entered portfolios at conservative valuations and have already undergone operational improvement are expected to transact first.

A central theme of the report is widening performance dispersion. As higher interest rates reduce the impact of leverage and multiple expansion, return differences between top- and bottom-quartile managers are becoming more pronounced. Preqin argues that this dynamic places greater weight on manager selection, sector expertise, and hands-on portfolio management.

Operational value creation is positioned as the primary driver of returns going forward. The report highlights increased focus on cost discipline, pricing strategies, and margin protection, as private equity firms adapt to a slower growth environment and longer holding periods.

Preqin concludes that private equity’s next phase will be defined less by scale and more by execution. Firms that can demonstrate credible exit pathways and consistent distributions are expected to regain LP momentum first, while others risk being sidelined despite substantial unrealised portfolios.

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