Private equity returns expectations are not looking promising.
According to a PitchBook report released in April, private equity internal rate of returns for the third quarter of last year was just 0.98% compared to 2.66% for the S&P 500. Preliminary returns for the fourth quarter did rebound to 2.52%, although the S&P 500 continued to return 2.66%.
Longer-term IRRs, often taken to favour private assets, look equally unpromising. Ten-year net IRRs stood at 14.17% at the end of September 2025 compared to 15.30% over the same period for the S&P 500. And over 20 years, private equity returned 12.88% versus 10.97% for the S&P 500.
The findings reinforce those in a newly released report, also from PitchBook, which says private equity funds are returning capital at well below historical rates, holding periods remain elevated, and the industry is sitting on a backlog of more than 13,000 portfolio companies and hundreds of billions of net asset value locked in ageing funds.
Nonetheless, predictions in its April report are still for private equity to constitute 33% of overall private market assets under management within five years, growing at a 5.2% compound annual rate from $6.8 billion in 2025 to $8.8 trillion by 2030. However, this figure includes evergreen vehicles, a growing number of funds holding assets for far longer than customary.
Furthermore, the dispersion of returns look highly unfavourable. As of end-September 2025, the top decile funds from the 2024 private equity vintage were delivering up to 70% net IRR, while the bottom decile delivers minus 20% — the greatest dispersion seen since at least 2001.
Private equity’s rampant growth and reputation for high returns look ever more the fruits of an era of rock bottom interest rates, which vanished in 2020.
The general partners who built their actual returns not on value enhancement but on levering their investments with cheap debt are being left stranded as the cheap money tsunami recedes. And the high costs and fees of private equity look increasingly less justifiable now that the outsize returns are out of the way.
LPs able to access top-decile funds are, of course, still justified in seeking exposure to the asset class. Institutions that are still evaluating investment into private equity can afford to be a lot more careful, circumspect, demanding and critical.
