The year started with strong optimism around a potential IPO wave and M&A rebound. Then came the April tariff shock, which injected real volatility and paused momentum across markets. Yet private markets showed their strength: they adapted, deployed capital thoughtfully, and delivered progress in high-conviction areas.

Venture capital stayed firmly in the AI lane. AI companies pulled in the bulk of funding, with the U.S. capturing roughly 85% of global AI capital. OpenAI's $40 billion raise in March—at a $300 billion valuation—set the record for the largest private tech funding round ever (and secondary activity later pushed implied values even higher). Other standout deals spanned defense tech (like hypersonic systems), conversational AI unicorns, and institutional-grade blockchain infrastructure. The landscape continued consolidating, as the number of active VC firms declined further and top-tier managers claimed a larger slice of the fundraising pie.

Growth equity played a supporting role amid the focus on bigger buyouts, but late-stage rounds grew meaningfully as companies stayed private longer. Global PE/VC deal value increased notably, with add-ons making up more than 75% of buyout activity. Exits rebounded strongly in the first half before tariff uncertainty slowed Q2.

Private equity came roaring back in scale. Q3 buyout value hit record territory (around $310 billion in some reports), fueled by major take-private transactions in tech, healthcare, and consumer sectors. Deployment picked up pace, trimming dry powder from peak levels, while continuation vehicles and secondaries (on track to surpass $200 billion) became essential liquidity tools. Fundraising was more measured, but private wealth channels accelerated sharply—evergreen funds and accessible vehicles gained real traction among retail and high-net-worth investors.

Capital markets steadied after the initial disruption. Global IPO proceeds climbed meaningfully, led by larger, higher-quality deals where PE-backed offerings punched above their weight. Leveraged finance issuance surged, and private credit expanded its share. Infrastructure emerged as a clear winner: AI's massive power and data center needs drove record fundraising and blockbuster platform investments.

In summary, 2025 underscored private markets' ability to navigate turbulence—AI momentum accelerated, scale returned to transactions, and new mechanisms for liquidity and capital access proved their value.

📌 TL;DR

• AI Dominance in Venture: AI captured the majority of capital, led by OpenAI’s $40B raise at $300B valuation; U.S. held ~85% of global AI funding

• Consolidation & Selectivity: VC firm numbers continued declining, with top managers taking a disproportionate share of fundraising

• Megadeals Return in Private Equity: Record Q3 buyout levels (~$310B), powered by large take-privates in tech, healthcare, and consumer

• Exit & Liquidity Progress: Strong H1 exits, bolstered by continuation vehicles and secondaries topping $200B

• Infrastructure Breakout: AI-driven data centers and power needs fueled record fundraising and major investments

• Capital Markets Recovery: Meaningful IPO proceeds growth post-tariff, with larger deals and sharp rise in leveraged finance

Overall: Private markets adapted to volatility, with AI leadership, large-scale deployment, and emerging liquidity channels driving results.

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2026 Outlook: Measured Optimism Supported by Improving Fundamentals

2026 sets up for higher activity and more selective opportunities, tempered by ongoing risks: geopolitical tensions, persistent inflation, and roughly 35% recession odds. On the positive side: expected lower rates, improving trade policy clarity, and sustained AI infrastructure buildout.

Venture capital will prioritize quality. AI remains core, but diligence will sharpen on revenue models, unit economics, and profitability paths. Capital should concentrate in AI infrastructure/tooling, healthcare tech, climate (especially Europe), defense/cybersecurity, and vertical SaaS. Top-tier AI valuations will hold firm, while the gap narrows between true AI-native businesses and the rest.

Growth equity looks ready for a stronger run. Prolonged private durations create clear demand for growth capital, and lower rates make it more appealing relative to levered buyouts. Leading themes: AI-adjacent platforms, software consolidation, embedded finance, digitized B2B marketplaces, and scaling healthcare models. Manager selection will matter more than ever, given widening dispersion between top-quartile specialists and generalists.

Private equity enters the "deployment year." With meaningful dry powder still in place and LPs pressing for distributions, global M&A should exceed $2 trillion. Expect faster exits (including more take-privates), continued add-on dominance, and a shift toward operational improvements over pure financial engineering. Sector specialists—in enterprise software, healthcare services, industrials, and subscription consumer—will have the edge.

Capital markets should stay supportive. IPO proceeds could top $200 billion if conditions hold, led by mature, profitability-focused companies in tech, healthcare, and industrials. Leveraged finance will grow further, with private credit and banks competing intensely.

Infrastructure benefits from durable AI tailwinds: expect significant new capital into data centers, power generation (renewables, natural gas, nuclear), grid upgrades, and digital connectivity. Corporate PPAs and European green efforts will help balance any U.S. policy adjustments.

Key overarching themes: AI maturation (hype settles, infrastructure endures), mainstreaming of private markets via retail access, greater public-private fluidity, geopolitically shaped strategies, renewed emphasis on operational value creation, ESG regional divergence, and secondaries as core liquidity plumbing.

Challenges persist, but 2026 offers a clearer path forward than the past few years—better exits, stronger deployment, and continued innovation. Winners will be those with operational depth, early private wealth strategies, and disciplined quality focus.

📌 TL;DR

• Venture Capital: Quality-first shift—deeper scrutiny on revenue/profitability; flows to AI infra/tooling, healthcare, climate, defense/cyber, vertical SaaS

• Growth Equity Resurgence: Stronger positioning from private-for-longer trend + lower rates; themes: AI-adjacent, software roll-ups, embedded finance, HealthTech scaling

• Private Equity Deployment Year: Dry powder + LP pressure to fuel >$2T global M&A; operational focus and sector specialization take center stage

• Capital Markets Constructive: IPOs potentially >$200B, led by mature/profitable names; leveraged finance growth and private credit competition intensify

• Infrastructure Momentum: Major investments in data centers, power, grids, connectivity—structural AI demand drives it

• Macro & Thematic Drivers: Lower rates, trade clarity, AI maturation as tailwinds; geopolitics, inflation, ~35% recession risk on watch

Overall: 2026 provides a more constructive environment—stronger pathways, higher activity, sustained innovation—with success tied to quality, operations, and adaptability.

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