A new study from the Centre for Economic and Policy Research (CEPR) describes private equity in the US as being “in the doldrums and out of favour” with institutional investors.
It shows that although median private equity returns outperformed the S&P 500 from 1995 to 2006, it largely lagged the US stock benchmark from 2020. From 2022 to the third quarter of 2025, US funds averaged 5.8% returns a year versus 11.6% for the S&P 500.
The study attributes the performance problems substantially to funds’ failure to mark their holdings to market following the near-20% correction in the S&P 500 in 2022. It argues that the fixation on pre-2022 valuations has left their portfolio companies historically overvalued, and increased the difficulty of achieving exits.
CEPR quotes remarks by Hugh MacArthur, global private equity practice chairman at Bain & Co. from last September that private equity faces a five-plus-year challenge to process the overhang of unexited assets and return money to limited partners (LPs).
As these conditions persist, alternative channels for achieving private equity exits are prospering. Coller Capital said in a report last month that it was seeing record growth in the secondaries market, with secondary deal volume expected to have reached $220 million-$230 billion in 2025, 30% more than in 2024.
The private equity secondaries house pointed to liquidity challenges for fund LPs and the growth of continuation funds as key drivers of secondary activity. Traditional exit channels, meanwhile, continue to be stalled, leading to a growing backlog of unrealised assets.
LP investors are increasingly driving their own exits to get money back from private equity commitments, according to Coller Capital. LP-led transactions accounted for about 54% of secondaries deals, and around half of them are LP repeat sellers.
Private equity fundraising is seeing corresponding difficulties. The CEPR study cited Preqin data predicting 2025 fundraising would be lower than $600 billion, the least since 2019.
The study does forecast that lower interest rates and upticks in mergers and acquisitions and listings will somewhat improve the fortunes of US private equity funds in 2026. But it also warns that funds will seek to offset declining institutional investor support by targeting 401(k) retirement savings plans instead. Caveat emptor.
