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Private assets

How the market is killing private equity…and making it stronger

April 08, 2026 - 4 min

Introduction

Regardless of the asset class investors hate uncertainty. And today we have a lot of uncertainty. We have geopolitical uncertainty and all of a sudden, again, interest rate uncertainty. On the opportunity side, I think there's a lot of maturation in private equity.

 

We've heard a lot about the concentration of US markets, but is private equity becoming too concentrated too?

So certainly there has been a lot of concentration in the private equity world over the last few years, and now we have a lot of, I should say, very large funds and a lot of smaller funds. I think it actually is not too much concentrated. I think it does make a lot of sense for both investors and companies and fund managers. And I think, for firms like Flexstone who concentrate on small and mid markets, it is a great opportunity because as I like to say, 80% of companies around the world are privately owned, the world is private and most of those companies are small in size and revenues and profit. And that creates a lot of investment opportunities for the small and mid market world to generate value for the investors.

 

Are private equity investment cycles shortening? How can the traditional long-term private equity investment model adapt to rapid economic changes?

I don't think there's a shortening of investment cycles in private equity. Investment in private equity is a long-term investment strategy and that will not change, in my view at least. What changes though is that it has become a lot more difficult to generate value. If we look at how value is generated in private equity, you need three things, right? You need leverage, you need multiple expansion, and you need of course growth of the underlying assets that you buy, the underlying companies. In the olden days, leverage was cheap and you could put a lot of leverage on companies, multiple expansion, you could bank on it, most certainly. So in fact, if you had those two levers of value creation, you only needed about 5% growth of the companies you buy to generate your 2.5 x over five years.

Now with leverage a lot more expensive, a lot less accessible and multiple expansion, not possible, because we are already at very high investment multiple, you really need to be able to generate 12% annual gross rate at the underlying assets level if you want to have your 2.5 x return to your investors. So what it means is for investors or private equity professionals, they need to be able to help the companies they buy to grow at 12% per year. And that is not easy and it's a totally different ball game for these operators.

 

What are the biggest external threats and opportunities you foresee for the private equity market in the next 3-5 years?

Regardless of the asset class investors hate uncertainty. And today we have a lot of uncertainty. We have geopolitical uncertainty and all of a sudden, again, interest rate uncertainty and as you know, interest rates are driving returns in private equity in particular, right? So, all these uncertainties are the things I will be worrying about over the next two to three years.

On the opportunity side, I think there's a lot of maturation in private equity in general. It has become a lot more sophisticated as an asset class and as a result you have an emergence of new investment strategies, which we find very attractive. There are of course secondaries and all the derivatives of secondaries, which have grown very substantially over the last few years and will continue to grow. And we are very interested in increasing our allocation to secondaries. So we also see emerging manager trends and we also see fundless sponsored trends, which we think still today are relatively niche subsegments of the market, but we think these will grow very substantially and we'll allocate capital to those.

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