StepStone | 2026 mid-year investment outlook: Private equity
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[CIBC logo]
[CIBC Global Asset Management]
[StepStone Group]
[2026 mid-year investment outlook: Private equity]
[Alpine SPRIMTM Private Markets Fund]
[Featuring Brett Schlemovitz, President, StepStone Private Wealth]
[A headshot of Brett Schlemovitz]
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Hi, everybody, I’m Brett Schlemovitz, I'm the president of StepStone Private Wealth.
So, so far this year, coming into 2026 the private equity market had largely shaken off tariff concerns of 2025, and dealmaking seemed to be on the rise.
I think a lot of people thought that the first half of 2026 would be the time for the private equity industry to revert to normal in terms of liquidity and the volume of deals picking up from the past couple of years. But like what has happened over the last couple of years, we sort of take one step forward and two steps back.
We saw a couple shocks in the market. We saw, some noise around private credit, and obviously the war in Iran. The positives are that the overall economy remains a bright spot. Most companies are in expansion mode right now. On the private equity side, there's plenty of dry powder to do deals. So raising the capital isn't the problem and the capital is available. And then, the debt markets are widely open and available to provide the financing for private equity deals.
Some of the headwinds broadly in the industry continue to be elevated interest rates, which, over a 20-year period on a relative basis aren't elevated, but they’re certainly elevated versus what we've seen in the last couple of years. Valuations, while still at a discount to the public markets on a relative basis for the private markets are still fairly high.
So the macro takeaway is that the cycle has turned positive, but it's not back to a 2021 environment. It's a more selective execution driven market.
In terms of valuations overall, one of the key shifts that we're seeing in 2026 is pretty much the plateauing of purchase price multiples. Multiples on a relative basis in the private markets are still fairly high. And we just don't think deals will transact if multiples get any higher. Overall we also think returns will be much less reliant on multiple expansion, and a large part of that is because multiples are higher.
Overall the mentality in the private equity industry, there's a lot more focus on operational value creation. You really have to figure out ways to buy good companies and find ways to improve them over time.
In terms of deal making: so deal activity is recovering, but is definitely still constrained by valuation gaps between buyers and sellers. When people talk about private equity, one of the things that's been spoken about the last couple of years is just the exit environment.
People thought that 2026 would really be the year where the M&A market opened up due to less regulation, the IPO market opened up, and it just hasn't happened to the extent that people thought, and I think if deals get positive traction in the market, that should just encourage more companies to go public, which really hasn't happened in the last forty years or so. So I think all of this will certainly be helpful to the overall private equity climate.
So overall, we remain optimistic about the private equity market. Private equity is moving from more of a beta-driven market to an alpha-driven one where manager skill, liquidity solutions and operational execution matter much more so than they ever did before. Our key job is trying to figure out which managers are likely to outperform in the future. And we predominantly try and invest with almost all first quartile managers and sometimes managers in the second quartile.
What we really do as secondary investors is we are going through each fund that we're likely buying on the secondary market and individually underwriting each of those portfolio companies. We put together highly diversified portfolios of who we believe to be the highest quality managers. And, that has been important over the last 20 years. If you look at private equity returns, top quartile returns have been north of 20% a year. Median returns have been about 14, 15% a year, and bottom quartile returns have been about 7 or 8% a year. So you've seen dispersion over the last 20 years. But we think that dispersion is really going to widen out over the next 20 years, making it critically important to invest in those top quartile managers.
[The information contained in this material are the views of StepStone Group and compiled by CIBC Global Asset Management. CIBC Global Asset Management does not undertake any obligation or responsibility to update such opinions. This video was created on 07/20/2026.
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