PE execs warn 2019-21 buyout funds face disappointing returns
Private equity funds launched during the industry’s 2019 to 2021 boom are unlikely to deliver the returns originally promised to investors, according to a a report by the Financial Time citing a number of senior dealmakers and fund executives.
A report by the Financial Times warns that private equity funds launched during the 2019-2021 boom may fail to meet investors' expectations for returns, according to senior dealmakers and fund executives. Estimates from five experienced investors suggest that 2/3 to 90% of these "vintage" funds could miss their initial return targets.
The industry experienced strong deal activity during this period due to low interest rates, abundant financing, and optimistic corporate growth assumptions, driving up buyout valuations. However, these investments are now facing a tougher exit environment and higher capital costs. James Brocklebank, a managing partner at Advent, noted that the exuberance surrounding 2021 led investors to commit capital at inflated valuations, making it difficult for many funds to meet their original objectives.
Many managers are hesitant to sell assets acquired during the boom, as it could lead to realized losses or lower reported returns. Experts predict that only a few of these funds will achieve their targeted internal rates of return, with some expecting returns as low as 7%-8%. The industry is also experiencing a prolonged shortage of exits and distributions, with only $386 billion in portfolio asset sales in the first half of 2026, compared to a year earlier.
This distribution drought has persisted for several years, with the industry returning less than 15% of net assets to investors in 2025, down from an average of 25% in the previous decade. This liquidity gap is straining relationships between limited partners, who seek liquidity, and managers who are reluctant to accept lower valuations for portfolio companies.
Some investors view a discount as evidence that valuations were not reliable, while others like Apollo Global Management's Scott Kleinman maintain that the acquired companies are strong businesses, albeit purchased at excessive prices. Kleinman expects these companies to eventually deliver satisfactory returns, but acknowledges that the long holding periods may result in IRRs below initial targets.
Written by urgent.news from Private Equity Wire's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
