Most listed private-equity funds are trading at deep discounts to net asset value (NAV). These discounts imply scepticism from investors about whether the funds will be able to sell many of the holdings in their portfolios at the valuations at which they are currently carrying them – a concern driven by several years of limited exits. However, over the past 18 months, managers have started to monetise investments more successfully. Can a savvy investor grab any low-hanging fruit before discounts start to narrow?
Before considering whether listed private-equity funds offer value at discounts, it is worth understanding the cyclical challenges that private equity has been facing. Private equity had surged in popularity over the past decade, mainly due to a strong track record. Returns regularly outperformed public market – buyout funds have achieved an internal rate of return (IRR) of 15% globally over the last ten years, according to Pitchbook. What made this look even better was that returns showed limited volatility, since they are typically based on semi-annual valuations made by managers. For example, valuations decoupled with listed markets in 2022, with private equity down by 4.1%, while global equity markets fell by 25.4%.
Private-equity funds typically exit investments through initial public offerings (IPOs), “trade sales” to another company in the same industry, or sale to another private equity buyer. Wind back to 2021 and the industry was in a Goldilocks market. Globally, exits reached over $1.7 trillion that year, according to McKinsey – more than three times the level of 2007. Funds offloaded many firms that had benefited from lockdowns or had refinanced at record low interest rates. A record number of IPOs, many made at irrational valuations, generated windfalls. Most of these IPOs later fell by 50%: Allfunds, Cazoo, Deliveroo, Dr Martens and Petco to name a few.
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However, exits then halved to $800 billion in 2023. As a result, money distributed to investors was quickly outpaced by capital calls – ie, money that investors were putting into funds to pay for new investments (often commitments that they had made some years before). So there was a large cumulative gap between what investors were getting out and what they were being asked to contribute back.
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How have private-equity funds fared?
With the exception of 2021, the amount of capital returned to investors is not keeping pace with the increasing scale of private equity, which has tripled in size over the last decade and doubled over the past five – total assets under management for the whole private equity industry now exceed $14 trillion. Distributions as a percentage of NAV have fallen to 15% in 2025, versus 29% on average before the pandemic, according to Bain Capital.
A typical private-equity fund has a five-year period in which it makes investments, while the fund itself has a maturity of ten to 12 years. This means the last investment made will be held for a maximum of seven years, although funds usually aim to exit an investment faster than that (eg, three to five years). However, as a result of exuberant dealmaking in 2021 and the recent slowdown in exits, private-equity funds have ended up holding a lot of companies longer than planned. “The average holding period for assets at exit is floating around seven years,” notes Bain. “The industry is still sitting on 32,000 unsold companies worth $3.8 trillion” Meanwhile, the median holding period for all investments – not just the ones being exited – is at a record of 6.3 years.
This logjam has created a significant problem for the industry. From 2011 to 2020, funds had sold 30% of their investments by year four, but just 19% of the 2021 acquisitions had been sold by 2025. These companies must be exited soon or at least undergo a “dividend recapitalisation” – taking on debt to pay out a large dividend. Managers need to return cash to investors to be able to fundraise for their next funds.
More than a third of the largest buyout funds were on the road last year to raise capital. Yet fundraising is challenging: in Europe, capital raised fell 41% year-on-year to $118 billion in 2025, according to McKinsey. It reportedly takes an average of 23 months to complete fundraising. Meanwhile, the number of funds trying to raise money is higher than ever: Bain reports there are 18,000 funds aiming to raise a total of $3.3 trillion. Maybe only a third of this target will be reached.
It is easier for blue-chip mega funds to raise money (25% of capital is raised by funds of over $10 billion), but even they need to return cash from existing funds to their investors. Distributions do not simply provide money that investors will cycle back into new funds – they also confirm that the valuations and performance are accurate. The proof of the pudding is in the eating. And of course, investors don't just want their money back – they want it back reasonably quickly, and this is becoming a point of contention. Less than 20% of private equity investors are satisfied with the pace of exits, according to a survey by data firm Preqin.
How private-equity fund exits work
Hence the need to get deals going. During the exit drought, some managers have sold holdings from one of their own funds to another. Some managed to convince investors to back continuation funds – new funds set up to specifically to buy assets from maturing funds. Continuation vehicles are now 14% of exits by value and can help to set a floor for the price of assets that must be sold. However, investors worry that they can be used to hide the real value of underperforming assets, delaying the day of reckoning. More broadly, these solutions are never going to be a substitute for an broad upswing in IPOs and deal-making.
The good news is that exits rebounded to $1.3 trillion in 2025, according to McKinsey – the second-highest year on record. While the impact of the Middle East crisis on markets remains a wildcard, it's likely that 2026 should witness a continued pick-up. Certainly mergers and acquisitions (M&A) activity has been strong in 2025 and at the start of this year. Corporates have strong balance sheets and are net buyers of assets. And while private equity buyers tended to be focused on add-on acquisitions last year, they are expected to do larger deals this year, allowing the “pass the parcel” of sales from one private equity owner to another. Of course, this requires debt markets to remain supportive.
Deserved discounts
So what does a pick-up in exits mean for private equity funds and discounts? Some investors argue that fund managers tend to value their portfolios conservatively and will surprise on the upside when selling their holdings. Recent exits are being done slightly above current valuation. However, sceptics will suggest that only the best assets are currently being sold.
In general, the existence of a discount to NAV is justified for private equity. Some funds may hold investments at cost, even where the traded price of loans or bonds issued by portfolio companies unambiguously indicate some trouble. In other cases, they may not adequately reflect market reality. While IPOs accelerated in late 2023 and 2024 – with deals including Birkenstock, Galderma, Douglas, Renk, Younited and Zabka – the trend was short-lived. Yet some private equity managers refuse to reset marks on their holdings, considering the IPO discounts needed to achieve exits to be too deep.
As a result, investors are right to challenge NAVs reported by managers. However, in the secondaries market – the buying and selling of stakes in unlisted funds – discounts have stabilised at around 15% and may tighten as buyers such as Ardian, Coller and Jefferies increase activity. Meanwhile, listed private equity funds are trading at discounts of 30% or more – and should represent a much better opportunity than buying into secondaries funds with their layers of fees.
What to buy in the private equity market
3i (LSE: III) is the oldest private equity firm in the UK. It was trading at a 70% premium to NAV in 2024, but the share price finally corrected and is now below NAV. However, the portfolio is extremely concentrated, with two-thirds of the NAV in discount retailer Action. This is being valued at an enterprise value to earnings before interest, tax, depreciation and amortisation (EV/Ebitda) of 18.5. Action's growth is slowing and the very high concentration of the portfolio makes the investment risky
Instead, we can look for trusts that are trading at a discount to NAV and are using cash from disposals to buy back their shares instead of paying high prices for new investments. For example, Oakley Capital Investment (LSE: OCI) trades at a very attractive 35% discount to NAV. HarbourVest Global Private Equity (LSE: HVPE) trades at 30% discount. It recently sold a $300 million portfolio of five buyout fund positions at a 6% discount to NAV and used some of the proceeds to buy back shares.
Pantheon International (LSE: PIN) trades at a 30% discount to NAV, which has widened significantly since December 2021. The portfolio is mature, with an average holding period above five years, and half the portfolio is in pre-2020 vintages. The NAV may also lag some of the uplift in valuations seen this year. The company announced some buybacks, as well, to narrow the discount, but is under growing pressure from activists on its shareholder roster – including AVI, Metage and Saba – to do more.
Looking beyond the UK, Eurazeo (Paris: RF) trades at a compelling 50% discount to NAV. The portfolio is very diverse in terms of sectors and strategies (buyout, growth, venture and asset-based financing) and the company also manages large amounts of third-party money. It is ahead on its exit plan, having sold 31% of its assets since 2023.
In Poland, MCI Capital (Warsaw: MCI) is a great opportunity It offers exposure to the steadily growing region of central Europe and to fintech and e-commerce sectors. The company has been listed since 2000 and the portfolio includes travel technology firm eSky, which now owns Thomas Cook. It has realised successful exits in 2025 and it trades on a 30% discount to the NAV.
Wendel (Paris: MF) trades on a 50% discount to NAV due to doubts on its strategy. It is run by an old industrial family from the north of France, similar to the Bonomi family and Investindustrial, or the Wallenberg family and EQT. However, the acquisition of private equity manager IK Partners and Monroe Capital in recent years is transformative. The last three funds of IK Partners are strong performers and should enable the firm to continue fundraising.
Once you factor in the value of IK Partners, Monroe, a stake in listed testing and inspection firm Bureau Veritas, and cash, no value is assigned to the €3.3 billion unlisted portfolio. Even though Wendel has significantly reduced its holding of Bureau Veritas – as well as exiting coatings firm Stalh (after nearly 20 years) and telecom-tower operator IHS with a 20% premium to NAV – it keeps trading at deep discount. This is a great opportunity for the patient investor.
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