Private equity's recovery is underway

The private equity sector has seen an encouraging recovery since the final quarter of 2024, in spite of a complex geopolitical and economic backdrop. It is emerging from a period of consolidation, as sentiment starts to catch up with the reality of private equity performance, and transaction activity starts to revive. It is an exciting moment to revisit a sector in transition.

The long-term credentials for private equity investment are well-established. It has consistently delivered an excess return over public markets. The 2024 American Investment Council public pension study, which focused on US public pension portfolios, found the private equity median annualized return to be 15.2% over a 10-year period, outperforming all other asset classes including public equity, real estate, and fixed income.¹ Listed private equity investment trusts have benefited from this strength, with shareholder returns in the top decile of all investment trusts over the same period.²

More companies are staying private for longer, enjoying the flexibility and support that private capital can provide. The median age for private companies has increased from 6.9 a decade ago to 10.7 years today³. For private equity investors, this creates a wide choice of high-quality companies across a breadth of sectors.

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At HarbourVest Global Private Equity (HVPE), we invest in a range of private equity opportunities, including seed and later-stage venture capital, growth equity and buyouts, plus a small amount of infrastructure and private credit. For HVPE, the top 10 exposures include companies as diverse as discount retailer Action Nederland, Yorkshire-based food producer Froneri, and UK financial giant Revolut. There is also AI exposure through enterprise data company Databricks and ‘picks and shovels’ AI group, Scale AI, providing data on which large-language models are trained.

Private markets tend to be less volatile than public markets^4, so the troughs tend to be less extreme, while recoveries can sometimes lag the major public market indices, as we have seen recently. In this cycle, the underlying private companies have been resilient, but discounts of listed private equity investment trusts have widened substantially and remain high even as net asset values have improved.

Private equity merits a long-term home in investors’ portfolios, providing access to differentiated and dynamic companies in high-growth sectors such as AI, healthcare and business services. There are also compelling shorter-term drivers as the sector recovers from a period of relative weakness. We believe it is a good moment to re-examine the asset class and particularly HVPE as a well-diversified fund with a strong track record in this sphere of the market.

The overall picture is of a sector in the foothills of recovery, with transaction volumes increasing, valuations stabilising and a full pipeline of maturing investments being prepared for sale. Valuations remain attractive, while share prices in the listed private equity sector offer real upside potential as sentiment begins to catch up with reality.

¹ Source: 2024-AIC-Pensions-Report_final.pdf

² Source: Association of Investment Companies March 2025

³ Source: Unicorns and the growth of private markets | Morningstar Indexes

⁴Source: MSCI Private Capital Solutions, S&P Capital IQ