Key Takeaways
- • Scott Hart, partner and CEO at StepStone Group, argues that while the private equity model itself remains sound, the assumption of uniform success across the sector has been disrupted by lingering habits from the "easy money" era.
- • The private equity industry developed operational patterns and investment practices during periods of abundant capital that may no longer be sustainable or optimal in a normalized funding environment.
- • StepStone Group's analysis suggests the sector must break ingrained behaviors rather than fundamentally restructure its core investment framework to adapt to current market conditions.
Summary
Scott Hart, partner and chief executive at StepStone Group, contends that the private equity industry faces a critical inflection point driven not by structural flaws in its fundamental business model, but rather by outdated operational habits formed during the era of abundant capital. Writing in Private Equity International, Hart distinguishes between the model itself—which remains viable—and the false impression that uniform success is achievable across all strategies and managers in the current environment.
The commentary reflects broader industry recalibration following years of elevated capital deployment, compressed valuations, and relaxed risk management standards that characterized the low-interest-rate environment. As funding conditions tightened and cost-of-capital dynamics shifted, many private equity firms continued to operate with assumptions and practices calibrated for easier market conditions. These behavioral patterns, rather than fundamental model deficiencies, now represent a primary obstacle to performance and capital efficiency.
Hart's perspective from StepStone Group—a major global alternatives platform with deep visibility into fund performance, valuations, and capital allocation trends—carries significant weight within the institutional investor community. The distinction he draws is strategically important: it suggests that successful firms will be those that consciously abandon legacy approaches to underwriting, leverage deployment, and exit timing, rather than those waiting for market conditions to revert to prior norms. This framing aligns with ongoing performance divergence among top-tier and mid-market managers in 2026, where disciplined capital allocation and realistic return assumptions have increasingly separated leading performers from the broader cohort.
The commentary reflects broader industry recalibration following years of elevated capital deployment, compressed valuations, and relaxed risk management standards that characterized the low-interest-rate environment. As funding conditions tightened and cost-of-capital dynamics shifted, many private equity firms continued to operate with assumptions and practices calibrated for easier market conditions. These behavioral patterns, rather than fundamental model deficiencies, now represent a primary obstacle to performance and capital efficiency.
Hart's perspective from StepStone Group—a major global alternatives platform with deep visibility into fund performance, valuations, and capital allocation trends—carries significant weight within the institutional investor community. The distinction he draws is strategically important: it suggests that successful firms will be those that consciously abandon legacy approaches to underwriting, leverage deployment, and exit timing, rather than those waiting for market conditions to revert to prior norms. This framing aligns with ongoing performance divergence among top-tier and mid-market managers in 2026, where disciplined capital allocation and realistic return assumptions have increasingly separated leading performers from the broader cohort.
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