- PE valuations are attractive again relative to public markets; timely entry point as rate cuts begin
- Returns shifting from leverage to fundamentals; greater focus on growth & operational improveme
- Primaries, co-investments, and secondaries offer complementary benefits
- Evergreen structures broaden access and resilience, especially when anchored by secondaries
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Relative value shifts back toward private markets. Private equity is undergoing a meaningful transition, and for long-term investors, this shift may be creating more attractive opportunities than we have seen in several years. To understand why, we must begin with valuations. Over the past few years, higher interest rates have slowed deal activity and moderated valuations. Meanwhile, segments of the public equity market, particularly large-capitalisation technology stocks, have appreciated sharply. The result is that private assets no longer look as relatively expensive as they once did. For investors, this creates a golden window of opportunity to capitalise on low entry multiples. Moreover, with rate cuts now set in motion, valuation multiples could see steady uplifts over time, creating a compelling case for private equity.
Less leverage, more muscle. However, valuation alone does not tell the full story. The industry itself has evolved. In an era of ultra-low interest rates, private equity managers could enhance returns by employing substantial leverage. Debt was inexpensive, and financial engineering played a significant role in amplifying gains. Today, borrowing costs are structurally higher and lenders are more selective. Consequently, managers are increasingly focused on genuine value creation by growing revenues, expanding margins, rationalising costs, streamlining operations, and deploying technology to improve productivity. Returns are becoming more closely tied to the fundamental improvement of underlying businesses rather than balance sheet leverage. From a long-term perspective, this is a promising step toward sustainable and reliable growth in private equity investments.
Planting trees to harvest for decades. For investors, access to private equity generally comes through three principal routes: primaries, co-investments, and secondaries. Primaries represent the traditional “drawdown” approach whereby capital commitments to a new vintage will only be deployed gradually over several years. Early performance often appears muted due to fees and gradual capital deployment, a dynamic known as the “J-curve.” Yet primaries provide exposure to the full life cycle of value creation. As more companies choose to remain private for longer, a significant portion of their growth occurs before any public listing. Primaries allow investors to participate in that earlier phase of expansion. Importantly, primaries remain the only viable route to access niche opportunities such as take-privates, carve-outs, and etc., which have collectively reached c.USD76bn in cumulative value.
Direct exposure with fewer tolls. Co-investments involve investing directly alongside a private equity manager into a specific company, rather than through a blind pool fund. This approach typically comes with lower fees and carried interest, which can meaningfully boost net returns. Investors also gain greater transparency and control, as capital is deployed more quickly into known assets at current market valuations. While co-investments benefit from the manager’s deal sourcing and due diligence, they are less diversified, meaning performance depends more heavily on the success of individual companies. For sophisticated investors with the resources to assess deals and the ability to tolerate concentration risk, co-investments can be an efficient way to enhance returns and manage portfolio timing, especially during periods of market uncertainty.
Second hand stakes, first order cashflows. Secondaries present yet another compelling opportunity. Here, investors purchase existing interests in private equity funds that are already partially invested. Because the underlying companies have been selected and developed to some extent, secondaries tend to mitigate the early J-curve effect and generate distributions sooner. Under certain market environments, they can also be acquired at attractive discounts, providing additional room for growth in returns. After three consecutive years of growth in secondary pricing, private equity secondaries pricing pulled back recently, availing an attractive opportunity for entry. Simultaneously, secondary market volume surged 48% y/y to a record USD240bn in 2025, setting a strong momentum for continual growth into 2026.
Evergreen by design, not by compromise. In recent years, evergreen private equity vehicles have gained massive traction, especially among individual investors. Traditional private equity structures require capital to be locked up for extended periods. Evergreen formats aim to introduce measured flexibility through periodic redemption windows, though withdrawals are typically capped and may be suspended during market stress. These vehicles often blend primaries, co-investments, and secondaries, while maintaining a sleeve of liquid assets to manage redemption needs. They represent an evolution that broadens accessibility without fundamentally altering the long-term nature of the asset class. Empirically, evergreen funds that consist predominantly of private secondaries display significantly attenuated downsides and enhanced upsides compared to drawdown funds. This underscores the synergy between the evergreen fund structure and secondaries, and the impact the blended offering can potentially deliver.
Relative value meets real growth. Taken together, the current environment marks a rare and constructive inflection point for private equity. More reasonable entry valuations, a renewed emphasis on operational value creation, and a broadened toolkit spanning primaries, co-investments, secondaries, and evergreen structures collectively enhance the risk reward profile for long term investors. As private markets mature and companies stay private for longer, these strategies offer differentiated access to growth that is increasingly less available in public markets. For investors with patience, selectivity, and a long investment horizon, private equity today is less about financial engineering and more about compounding fundamental value which may ultimately prove more resilient and rewarding over the cycle ahead.
Figure 1: Private equity valuations are at their most attractive relative to public equity in a decade
Source: Pitchbook, Bloomberg, DBS
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