Are PE firms struggling?

Private Equity Faces a Rough Stretch

Since mid-2022, private equity (PE) firms have been navigating one of the toughest stretches in recent memory. While public markets stumbled—evidenced by the S&P 500’s nearly 20 percent drop that year—PE funds continued to report steady valuations for their portfolio companies. This disconnect didn’t go unnoticed.

Unlike public stocks, which are marked to market daily, PE holdings are typically valued quarterly and often with a lag. This practice allowed firms to avoid immediate write-downs during the downturn, creating a perception of stability even as economic headwinds mounted. But reality has a way of catching up.

The delay in adjusting valuations has led to growing skepticism among investors. Limited partners—those who provide capital to PE funds—are now asking tougher questions about transparency and true asset worth. The illusion of resilience is fading as portfolio companies face tighter credit conditions, slowing growth, and more cautious buyer sentiment in the M&A market.

Exit windows have narrowed. IPOs are scarce, and strategic buyers are more selective. These pressures have amplified the strain on PE firms that rely on timely exits to generate returns. What’s more, rising interest rates—initially a boon for some strategies—have made leveraged deals costlier and riskier.

That said, private equity isn’t monolithic. Some sectors and firms continue to perform well, particularly those with defensive business models or strong operational improvements. Yet overall, the industry is under pressure to adapt—to recalibrate valuations honestly, support portfolio companies more actively, and deliver results in a far less forgiving environment.

The days of easy returns may be on pause. For PE, the path ahead demands more discipline, realism, and resilience than in the past decade’s boom years.