Is optimism returning to private equity?

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26 février 2026

After years marked by war, inflation, and rising interest rates, cautious optimism is returning. Understanding how these markets function offers insight into broader economic trends, and recent signals point to a cautious recovery.

The challenges of 2022-2023

Since early 2022, private markets have faced considerable headwinds from geopolitical tensions and tighter monetary policy. Russia’s invasion of Ukraine disrupted trade, while Western sanctions on Russia drove up energy prices and deepened supply-chain bottlenecks already stretched by the global pandemic. In response, central banks rapidly raised interest rates to curb inflation. Higher borrowing costs then rippled through private equity and broader markets.

In the US, average borrowing costs for leveraged buyouts rose from around 6% in early 2020 to nearly 11% by the end of 2022. In Europe, these costs jumped from 4% to about 10% over the same period, significantly complicating matters for private equity firms, which often use debt to fund acquisitions. When borrowing becomes more expensive, such deals lose appeal, leading to a slowdown in overall investment activity. Banks also tightened lending standards. As a result, new private debt issuance plunged from roughly USD 560 billion in 2021 to USD 280 billion by 2023, one of the steepest declines since the global financial crisis.

Monetary easing sparks a revival

By early 2024, interest rates began to ease, first in Europe and then more cautiously in the United States. In mid-2025, Federal Reserve Chair Jerome Powell signalled that risks in the labour market may now outweigh persistent inflation, opening the door to a rate cut as soon as September, while emphasising that decisions will remain firmly data-driven. Lower borrowing costs would make it easier for private equity to finance new deals and for businesses in general to invest, helping to restore liquidity and confidence, even as geopolitical uncertainty and political pressure continue to cloud the outlook.

Deployment and exits show confidence

This liquidity rebound has already begun to lift ‘deployment’, where private equity funds invest capital by acquiring businesses. Deployment volumes rose by 11% in 2024 compared to 2023, exceeding historical averages. Exit activity also grew by 14% over the same period and showed even stronger gains in early 2025. If the current pace holds, exits in 2025 remain on track to surpass those of 2024, despite the volatile trade environment. Growing exit numbers signal renewed confidence among investors and healthier economic conditions.

Deleveraging builds a healthier foundation

Fundraising has struggled to regain momentum as investors remain cautious, waiting for returns from existing funds before committing more capital. At the same time, managers continue deploying money, causing a rare decline in ‘dry powder’: the uninvested reserves that give private equity its firepower. This marks a significant shift. We view it as a positive sign of renewed deal activity, showing that managers are actively putting capital to work and that the market is beginning to regain its momentum.

Valuation multiples and secondary markets

Valuation multiples, used to assess how much investors are willing to pay for a company relative to its earnings, have stabilised after initially falling amid economic uncertainty and rising interest rates. These multiples matter because they reflect investor confidence in future profitability and growth. While not back to previous highs, the stabilisation suggests the worst of the decline may be behind us.

The secondary market, where existing private equity fund stakes are bought and sold, has also shown resilience. Prices were broadly steady, slipping briefly after Liberation Day before recovering in the second quarter. Activity has been supported by both larger and mid-sized private equity firms, which have increasingly used this market to return cash to investors. In the first half of 2025, total transactions reached USD 105 billion, the highest level on record.

Looking ahead

Overall, private markets have shown resilience and a degree of renewed momentum since mid-2024. Early 2025 jitters over US trade policy gave way to a rebound after key
negotiations were resolved, with deal-making picking up again in June and July. Interest rates have begun to normalise, investment deployment is gradually accelerating and exit activity has held steady. However, fundraising continues to lag historical peaks, and the heightened volatility under the Trump administration has added an extra layer of uncertainty to the outlook. Even so, the steady improvement in investment activity, combined with a reduction in dry powder, suggests that private equity markets are cautiously finding their footing and moving toward more sustainable, value-focused strategies.

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The Investment Funds are organised either as a “société d’investissement à capital variable (SICAV)” or “fonds commun de placement (FCP) ” under Part I of the Luxembourg law of 17 December 2010 on undertakings for collective investment. They are authorised and regulated by the Luxembourg supervisory authority (Commission de Surveillance du Secteur Financier – “CSSF”). The Investment Funds may be authorised for distribution in various countries; official registrations should be checked on a case by case basis.
The information available on this tool are directed only to citizens / residents of the countries in which the Funds are authorized for distribution, as well asto institutional investors. Persons not qualifying as investors in/from the above-listed countries or as institutional investors are invited to exit the website.The Funds are not sold or offered in the United States of America, its territories or possessions or to a “US person” as defined by Regulation S of the USSecurities Act of 1933, as amended.
The Investment Funds are organised either as a “société d’investissement à capital variable (SICAV)” or “fonds commun de placement (FCP) ” under Part I of the Luxembourg law of 17 December 2010 on undertakings for collective investment. They are authorised and regulated by the Luxembourg supervisory authority (Commission de Surveillance du Secteur Financier – “CSSF”). The Investment Funds may be authorised for distribution in various countries; official registrations should be checked on a case by case basis.
The information available on this tool are directed only to citizens / residents of the countries in which the Funds are authorized for distribution, as well asto institutional investors. Persons not qualifying as investors in/from the above-listed countries or as institutional investors are invited to exit the website.The Funds are not sold or offered in the United States of America, its territories or possessions or to a “US person” as defined by Regulation S of the USSecurities Act of 1933, as amended.
The Investment Funds are organised either as a “société d’investissement à capital variable (SICAV)” or “fonds commun de placement (FCP) ” under Part I of the Luxembourg law of 17 December 2010 on undertakings for collective investment. They are authorised and regulated by the Luxembourg supervisory authority (Commission de Surveillance du Secteur Financier – “CSSF”). The Investment Funds may be authorised for distribution in various countries; official registrations should be checked on a case by case basis.
The information available on this tool are directed only to citizens / residents of the countries in which the Funds are authorized for distribution, as well asto institutional investors. Persons not qualifying as investors in/from the above-listed countries or as institutional investors are invited to exit the website.The Funds are not sold or offered in the United States of America, its territories or possessions or to a “US person” as defined by Regulation S of the USSecurities Act of 1933, as amended.