A new report from PitchBook shows an unwelcome picture for US private equity. Deal value was US$177.3 billion in the second quarter, the lowest since the end of 2020. The figures fell 37.5% from the first three months of the year, and was down 23.9% from the second quarter of 2025.
Fundraising for the first half of 2026 was at $159.6 billion compared to $184.4 billion in all of 2025, which was the lowest in the last decade. At the current rate, the US asset class will be lucky to beat last year’s figures.Barring a few flagship funds, institutions seem to be backing out of US private equity.
Exits for the first half of the year are looking better at $293.7 billion, but as PitchBook notes, this depends on a small number of large high-value transactions while “little of the broader portfolio backlog is finding a path to liquidity”.
In an asset class historically focused on the top quartile or even decile, private equity’s leading firms seem to be leaving the rest ever further behind.
There are also worrying signs around firms’ investment aptitudes. The report highlights a retreat from software investments. “The sector that defined the past decade of sponsor returns is now the one that practitioners are most actively trimming from their portfolios,” it says.
Artificial intelligence is credited for this development, but AI itself may be headed for a similar reversal. “Though it was once PE’s anchor allocation, the sector at the centre of the AI reassessment is now viewed as damaged goods,” according to PitchBook.
Will this be the last such swing? Amid speculation around the potential bursting of an AI bubble, what does that say about the funds’ opportunity assessment capabilities?
The long-touted proposition has been that private equity is long-term patient capital and therefore counter-cyclical. That hardly seems tenable when funds and commentators alike are watching the latest signals about US interest rates.
US private equity’s tremendous growth prior to Covid-19 was supported by pension funds which are frequently underfunded and eager for above-market returns to finance their shortfalls. That grand bargain appears to be unravelling alongside the availability of cheap money to leverage deals.
The US is the birthplace and home of private equity. What if, in that environment, the whole proposition of a leveraged buyout is increasingly untenable? Where does that leave the asset class? Surely in dire need of reconfiguring itself towards the value enhancement that it always claimed, instead of the leverage that it grew dependent on in the cheap money era.
