From the Editors

The first half of 2026 unfolded differently than many had expected but in ways that underscored the ability of private equity to find opportunity even under sub-optimal conditions. At the start of the year, ample dry powder, improving financing markets and hopes for narrowing valuation gaps pointed toward the possibility of more transformational deal activity. Instead, a series of shocks, including the AI-driven repricing of software businesses, stress in evergreen private credit vehicles, renewed geopolitical volatility and persistent uncertainty over the path of interest rates, forced market participants to recalibrate. The result has been a market in which capital is being deployed with greater selectivity and sharper conviction.

That selectivity is visible across the industry. Fundraising remains concentrated among larger managers with established track records, even as secondaries and continuation vehicles continue to provide important liquidity tools in a constrained exit environment. On the M&A front, sponsors are focusing on add-ons, smaller transactions and opportunities where conviction around valuation and long-term value creation is strongest. In real estate, investors have moved past waiting for rate relief, but underwriting to the environment that exists, with demographic demand, structural undersupply and durable income growth separating stronger sectors from weaker ones.

While investors are adjusting to the macroeconomic environment, there are also regulatory changes to digest. In the United States and Europe, regulators are seeking to expand access to private markets while also raising expectations around governance, disclosure and investor protection. Tax developments in the UK, EU private funds reforms, non-compete enforcement and SEC whistleblower agreement cases all point to an environment in which operational discipline and documentation remain critical. AI is also reshaping both opportunity and risk, from the defensibility of software assets to cyber preparedness and the ownership, infringement and diligence issues raised by generative AI content.

We hope you find the 2026 Private Equity Midyear Review and Outlook to be a useful guide to the forces shaping sponsor activity as the industry works through a demanding but opportunity-rich market.