COLLEGE PLANNING | ESTATE PLANNING | INSURANCE | INVESTING | PORTFOLIO SPOTLIGHT | REAL ESTATE | RETIREMENT | TAX PLANNING
Private Equity Tests Investor Patience
Investors have looked to private equity for diversification, but they’ re facing longer lockup times for their investments.
By Christopher C. Williams
AT GOLDMAN SACHS’ S ANNUAL RIA Professional Investor Forum, held this year in New York City in May, John Waldron, the firm’ s president and chief operating officer, lamented the quarter-to-quarter focus and other responsibilities required of a public company. He joked to a ballroom of RIA professionals that those companies thinking of going public might want to think again.
“ Quarter-to-quarter is a burden when you’ re trying to build a longer-term franchise,” Waldron quipped.“ Those of you that are private, I hope you stay private. It’ s much more fun.”
But investors, financial advisors and their clients aren’ t always laughing at what’ s going on in private equity. The number of deals in the sector have slumped as of late. And the amount of time that PE firms are required to hold their portfolio companies has been stretched well beyond historical levels( rising from five years to more than six on average). That means investors are often trapped in portfolios with companies they can’ t exit at a time of geopolitical uncertainty and credit-quality worries for portfolio companies, especially those in software.
In addition, the rich valuations paid for companies in the PE heyday of 2020 or 2021 are turning off potential buyers today, while savvy sponsors are using the elongated waiting time to upgrade the operations of their captive companies and boost the holdings’ value as they wait for prices to improve.
“ You have a bunch of private equity funds that are not distributing capital,” says Eileen Duff, managing director and head of capital markets and marketplace at iCapital, a fintech platform that makes alternative investments accessible to wealth managers and high-net-worth investors.“ Therefore, their investors are getting a bit anxious and saying,‘ What the heck? I thought I would be seeing distributions by now.’”
Lagging Returns Amid Weak Deal Numbers
Consulting firm Bain & Co. estimates that the total global allocation to private markets is expected to grow to $ 62 trillion by 2032 from about $ 25 trillion in 2022. These markets are considered critical portfolio diversifiers at a time when public markets are overconcentrated in tech amid a massive AI infrastructure buildout. But private equity investors and advisors are contending with bulging deal backlog and thin returns.
In its 2026 market overview, alternative investment management firm Hamilton Lane reported that private equity’ s annualized returns lagged the S & P 500 over the last one-, three- and five-year periods ending last September— and that was even after the Magnificent Seven tech giants were removed from the equation.
McKinsey & Co., in its Global Private Markets Report for 2026, estimated that more than 16,000 private-equity-owned companies globally have been held on the books for more than four years, or a record 52 % of the total buyout-backed inventory as of 2025.
Furthermore, the typical company in the portfolio of a general partner firm is now held for more than six and a half years on average. That’ s longer than the five-and-a-half-year average of a decade ago, and, according to Bain’ s midyear 2026 report,
38 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2026 WWW. FA-MAG. COM