Key Takeaways
- • Private equity has historically absorbed approximately 55% of public market drawdowns while capturing over 100% of public market recoveries, demonstrating consistent resilience across major crises from the dot-com downturn through COVID-19.
- • Exit activity has moderated since 2022 due to elevated interest rates, inflation, and buyer caution, though quality assets continue to transact; a tariff-driven pause in M&A during 2025 reversed course with a more significant rebound in the second half of the year.
- • GP-led secondaries have expanded materially as a liquidity channel, providing an alternative exit mechanism as traditional sale activity normalizes following the 2022-2024 slowdown.
- • Private asset valuations remain below public market peers on a comparable basis, contrary to inflation concerns, reflecting persistent size and liquidity discounts that characterize the asset class.
Summary
StepStone and Fidelity executives outline a private markets landscape in 2026 characterized by sustained resilience despite macroeconomic headwinds and structural shifts in exit patterns. According to Michael Elio, StepStone Partner and Portfolio Manager, and Ian Johnson, Fidelity Institutional Portfolio Manager, the sector continues to demonstrate its historical ability to weather volatility while capital markets adjust to a higher rate environment.
Private equity's defensive characteristics remain a central theme. Historical data reveals that PE has consistently absorbed roughly 55% of public market drawdowns across major crises—including the dot-com collapse and COVID-19 pandemic—while capturing more than 100% of subsequent recoveries. This asymmetric performance profile underscores the asset class's capacity to compound value through cycles, a critical consideration for institutional allocators evaluating long-term exposure.
Exit velocity has decelerated materially since 2022, primarily driven by persistently higher interest rates, inflationary pressures, and increased scrutiny from prospective buyers. Rather than signaling market dysfunction, however, exits continue at measured levels with quality assets successfully transitioning to new ownership. Tariff uncertainty in 2025 created a temporary pause in M&A activity, though the second half of 2025 demonstrated a more pronounced recovery trajectory. Concurrently, GP-led secondaries have evolved into a more substantial liquidity mechanism, allowing sponsors to address fund deployment timelines and investor redemption requests without forced asset sales at distressed valuations.
Valuation concerns have periodically surfaced amid broader inflation narratives, yet evidence suggests private assets continue trading at discounts relative to public market comparables. These persistent discounts reflect structural factors including position size constraints and reduced liquidity relative to public equities, rather than inflated pricing. This valuation dynamic remains relevant for institutional managers seeking entry points and risk-adjusted return profiles in private markets.
Private equity's defensive characteristics remain a central theme. Historical data reveals that PE has consistently absorbed roughly 55% of public market drawdowns across major crises—including the dot-com collapse and COVID-19 pandemic—while capturing more than 100% of subsequent recoveries. This asymmetric performance profile underscores the asset class's capacity to compound value through cycles, a critical consideration for institutional allocators evaluating long-term exposure.
Exit velocity has decelerated materially since 2022, primarily driven by persistently higher interest rates, inflationary pressures, and increased scrutiny from prospective buyers. Rather than signaling market dysfunction, however, exits continue at measured levels with quality assets successfully transitioning to new ownership. Tariff uncertainty in 2025 created a temporary pause in M&A activity, though the second half of 2025 demonstrated a more pronounced recovery trajectory. Concurrently, GP-led secondaries have evolved into a more substantial liquidity mechanism, allowing sponsors to address fund deployment timelines and investor redemption requests without forced asset sales at distressed valuations.
Valuation concerns have periodically surfaced amid broader inflation narratives, yet evidence suggests private assets continue trading at discounts relative to public market comparables. These persistent discounts reflect structural factors including position size constraints and reduced liquidity relative to public equities, rather than inflated pricing. This valuation dynamic remains relevant for institutional managers seeking entry points and risk-adjusted return profiles in private markets.
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