Global Perspectives

Six months into 2026, private equity looks much like it did in 2025.

For an industry this large and this important to global capital formation, that is neither triumph nor failure. It is a sign of how challenging the current environment has become, and of how little the underlying story has changed.

A year ago, dealmaking recovered from the early tariff shock before stalling again by autumn. This year, the pattern has repeated almost exactly.

The private equity market so far 

The buyout market opened 2026 with real momentum, only for three shocks in quick succession; a valuation rout in AI-exposed software, redemption stress in private credit, and the oil price spike that followed the conflict in the Gulf, all combining to knock it flat again. Bain & Company, in its midyear report published in June, calls it a “Groundhog Day” dynamic.

Technology deal value fell 70% between the fourth quarter of 2025 and the first quarter of 2026 as software valuations were repriced. Bain’s own leading indicator, built on the volume of non-disclosure agreements processed ahead of live deals, points to activity remaining roughly flat through July.¹

Six months in, that proxy has proved unreliable twice running. The deal count tells us more about the macro environment than the asset class’s underlying strength, which remains considerable.

What hasn’t moved

Strip out the deal count, and the more durable challenge sits exactly where it was at the end of last year. Distributions to limited partners, measured against net asset value, have now stayed below 15 % for four consecutive years, the weakest run on record. Roughly 33,000 portfolio companies remain held within fund structures, and the average buyout asset now takes about seven years to exit, which is longer than historical norms.

Bain’s deal cost index, combining purchase multiples with financing costs, is near an all-time high: a deal that needed 5% annual earnings growth to deliver a 2.5x return a decade ago now needs something closer to 12%. The industry already has a phrase for it: twelve is the new five.²

There is a mechanism beneath these numbers that deserves to be understood on its own terms, rather than invoked as a criticism. A recent poll by the Institutional Limited Partners Association found that most LPs lose confidence in a manager the moment an asset sells at more than a 5% discount to its last reported mark.³

That creates a rational and largely defensible incentive: hold the asset, maintain the mark, and give the company time to grow into its valuation rather than accept a markdown that could unfairly penalise the next fundraise for a single soft exit.

The tension is that the longer this continues, the more pressure builds on the credibility of interim marks. Here, the industry’s record is reassuring rather than damning: Bain’s own data show that three-quarters of exits still clear above the second-to-last mark. The marks, in other words, are broadly sound.

The real issue is that the system’s incentives now pull towards patience at exactly the point in the cycle when LPs, after four lean years of distributions, need cash. That is a timing problem born of a difficult market, not evidence of an industry acting in bad faith.

What has moved

While exits stayed slow, the industry did what it has always done well: it innovated around the constraint. The secondaries market reached $240 billion in 2025, up 48%, and was the first year it cleared $200 billion. Private credit secondaries almost tripled. GP-led continuation vehicle volume in buyouts rose from $58 billion to $81 billion, up 39%, and closed continuation vehicle volume in Europe alone rose 93%. Secondaries strategies now account for 18% of all private capital raised, against 7% in 2021.⁴

It is worth being precise about what a continuation vehicle is, because the structure is often described in darker terms than it deserves. A GP sells a prized asset into a new fund it also manages, at a price informed by an appraisal process it influences, while continuing to earn fees on the asset.⁵

Set out that baldly, the potential for conflict is obvious, and it would be naive to pretend otherwise. But the structure also does something genuinely useful: it gives LPs who want liquidity a way to take it, let’s those who want continued exposure to a strong asset keep it, and allows a capable manager to keep building value in a company it knows well rather than selling a good business simply because a fund’s clock has run out.

The conflict is real and must be managed. It is not, however, evidence of bad intent, and the maturity of the governance that has grown up around these transactions—independent LPAC engagement, rigorous fairness opinions, sophisticated secondary buyers conducting real diligence—is the more important and more encouraging part of the story.

That governance is stronger than the sceptical reading allows. Secondary buyers routinely negotiate continuation fund fees down relative to the primary fund, often closer to 1% than the 2% charged on committed capital and typically require the GP to roll 50 to 100% of the carry crystallised on the legacy fund back into the new vehicle as proof of alignment.⁶  The carry is technically triggered; the deal team rarely sees the cash. Layer on the reset of individual carry allocations that most continuation vehicles force, rewarding whoever actually drove the asset’s performance, and the alignment mechanisms are considerably more robust than critics assume.

They do create a genuine retention challenge, since talented people are being asked to wait years for compensation they have technically earned, and some sponsors have sensibly begun addressing it through carry loans, lending against crystallised paper carry so that portfolio managers are not left waiting.⁷ That is a thoughtful response to a real problem, and a sign of an industry adapting responsibly rather than one in difficulty.

Retailisation kept moving too, largely unaffected by the institutional stall, and it represents one of the more socially valuable developments in the sector: the gradual opening of an asset class that has driven decades of pension and endowment returns to a broader base of investors. A record 123 evergreen vehicles launched in 2025, with more following in the first months of 2026,⁸ and semi-liquid fund assets, still a fraction of the institutional market, are on a trajectory to exceed $4 trillion by 2030.⁹

The second half

Bain’s own read on H2 2026 is measured rather than alarmed: nothing in the financial system looks structurally broken, equities remain buoyant, debt markets are open, dry powder is abundant, so little would be needed to unlock fresh dealmaking. What the market has lacked is a sustained equilibrium, which it has not held for more than a quarter at a time in eighteen months.¹⁰

Secondaries forecasters are more confident than dealmakers: Evercore expects over $200 billion to be raised for the strategy over the next twelve months, while Jefferies sees annual volume approaching $300 billion within two years.¹¹

The takeaway is that, whichever way headline dealmaking breaks, the structural shift toward secondaries, continuation vehicles and evergreen capital looks set to continue, and to strengthen the industry’s ability to serve its investors through a fuller range of market conditions.

What this means for IFCs

That divergence is the story IFC services should be built around going into H2. The old administration model, closed-end structures with a fixed life and a single exit event, is not the only one this industry now runs on.

The practical takeaway is that continuation vehicles need jurisdictions that can quickly stand up credible, independent governance: LPAC support, conflict management, and valuation oversight robust enough to satisfy sophisticated secondary buyers. Evergreen and semi-liquid vehicles need the administrative muscle of a mutual fund wrapped around assets never designed to be priced monthly. These are different skills, and they reward depth over marketing.

Domicile competition is already responding. Cayman added 430 private funds last year to reach 17,722, up 40% since 2020, built on its default status for institutional buyout and secondary structures.¹² Luxembourg’s growth targets the retail and semi-liquid opportunity inside the EU. Jersey and the other Channel Island centres are not short of the governance expertise this next phase rewards, but the takeaway is that this expertise only counts if it is made explicit, rather than assumed to still be doing the job that tax neutrality alone did for the last two decades.

The stakes

Having advised and or chaired GP boards through several of these transactions, the practical lesson is more constructive than the governance literature suggests. A continuation vehicle brings together three sets of interests that must be carefully aligned:

1. The LP being asked to trust a price set by the GP
2. The GP reconciling its own economics with its fiduciary duty
3. The deal team waiting for paper carry to become cash

That these interests need active management is not a weakness of the structure but a feature of any arrangement worth getting right, and the industry has, overall, risen to it. Conflicts of interest are a permanent feature of continuation vehicles and always will be. Disputes need not be, and the difference between the two is independent governance that is real rather than cosmetic, LPAC engagement that asks hard questions, and remuneration structures that keep everyone managing the asset properly incentivised.

Getting that balance right serves LPs, GPs and deal teams alike, and it is where IFCs, not solely as administrators but as the jurisdictions that supply the independent directors who make good governance real, have the strongest claim to the next phase of this business.

Private equity is not stalling this year because something is broken. It is working through the hardest set of conditions it has faced in fifteen years, and it is answering that challenge through structures that live or die on the quality of the jurisdiction and the governance behind them.

That is a considerable strength of the asset class, not a weakness: an industry that continues to create value for investors, portfolio companies and the wider economy even when the easy conditions fall away.

Endnotes

1.  Bain & Company, Private Equity Midyear Report 2026 (June 2026): https://www.bain.com/insights/private-equity-midyear-report-2026/
2.  Bain & Company, Private Equity Midyear Report 2026 (June 2026): https://www.bain.com/insights/private-equity-midyear-report-2026/
3.  ILPA member polling, as reported in Bain & Company, Private Equity Midyear Report 2026: https://www.bain.com/insights/private-equity-midyear-report-2026/
4.  Ropes & Gray, Secondaries Q1 2026 Update (Full-Year 2025 Results; data via Campbell Lutyens, Evercore, Jefferies, PJT): https://www.ropesgray.com/en/insights/alerts/2026/03/secondaries-q1-2026-update
5.  Macfarlanes, “Continuation fund structuring and terms”: https://www.macfarlanes.com/insights/102lodd/continuation-fund-structuring-and-terms/
6.  Macfarlanes, “Continuation fund structuring and terms” (fee reset and carry-roll mechanics): https://www.macfarlanes.com/insights/102lodd/continuation-fund-structuring-and-terms/
7.  Enness Global, “Carried Interest Loans Gain Popularity in Private Equity”: https://www.ennessglobal.com/insights/press/private-equity-leaders-turn-carried-interest-loans-payouts-slow
8.  Preqin, “Evergreen funds set off at record-breaking pace in 2026”: https://www.preqin.com/news/evergreen-funds-set-off-at-record-breaking-pace-in-2026
9.  Deloitte, “Semi-liquid funds: A US$4 trillion opportunity for traditional and alternative investment managers”: https://www.deloitte.com/us/en/insights/industry/financial-services/semi-liquid-funds.html
10.  Bain & Company, Private Equity Midyear Report 2026 (June 2026): https://www.bain.com/insights/private-equity-midyear-report-2026/
11.  Evercore and Jefferies forecasts, as reported in Ropes & Gray, Secondaries Q1 2026 Update: https://www.ropesgray.com/en/insights/alerts/2026/03/secondaries-q1-2026-update
12.  IFC Review, “Cayman: Cayman fund registrations increase 40% since 2020” (January 2026): https://www.ifcreview.com/news/2026/january/cayman-cayman-fund-registrations-increase-40-since-2020/