Liquidity, Concentration, and Big Bets: Your Weekly PE Roundup

Good morning, ! This week we’re unpacking private equity’s comeback tour, from the deal rebound driving $1.9T in global activity to the engineered liquidity powering secondaries and continuation funds. We also break down private credit’s growing pains, spotlight the $8.9B Clario exit, and look at how investors are applying the 12–24 rule to balance conviction and diversification. Plus, weigh in on our microsurvey: Where do you see the most attractive private credit opportunity today?

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DATA DIVE

The 12–24 Rule: Concentrated Enough to Win, Diversified Enough to Survive

A new simulation has sharpened the edge of an old portfolio debate: how many stocks is enough?

Using 10,000 Monte Carlo scenarios over a decade, researchers compared three strategies: a single stock, a cap-weighted index, and a portfolio of 12–24 equal-weighted stocks. The results? A clear winner on risk-adjusted growth: the 12–24 stock strategy.

Despite higher return assumptions (10.5% vs. 9%), the single-stock portfolio underperformed on median outcomes due to volatility drag. The index offered smoother returns, but also limited upside. But the 12–24 name strategy captured most of the equity premium while shedding idiosyncratic risk — delivering faster compounding without excessive dispersion.

Why it matters: For PE investors and family offices constructing concentrated public equity sleeves, the data quantifies what many intuitively believe: diversification’s power peaks early. Beyond two dozen names, the risk-reduction curve flattens dramatically — and every extra position dilutes conviction.

Bottom line: The optimal portfolio isn't broad, it's balanced. A 12–24 name basket threads the needle between alpha potential and drawdown resilience — a structure that mirrors how top GPs build conviction-weighted buyout portfolios.

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TREND OF THE WEEK

The PE Comeback Tour

After two years of deal drought, private equity is back on the road. Global deal activity hit $1.996 trillion (TTM), a 30% jump from 2024, per KPMG’s Pulse of Private Equity Q3’25. The drivers? Easing rates, $1.2T in dry powder, and valuations finally making sense again.
The industry’s pandemic-to-present arc looks like a three-act play: record highs (2021), correction (2022–23), and now, recovery (2024–25). Mid-market sponsors are leading the encore with carve-outs and secondaries.
If momentum holds, 2026 could echo 2021’s boom—but this time with less leverage and more discipline. Call it PE’s “great moderation.” (More)

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LIQUIDITY CORNER

Engineered Liquidity

Private equity's biggest bottleneck? Liquidity. Despite rising exit volumes and a warming IPO window, GPs are still trapped in a holding pattern—average durations now sit at 7+ years in North America. LPs are losing patience, with pressure peaking in Q3 2025, demanding distributions, not just PowerPoints.

Secondaries offer relief—$155B in 2024 deal volume, $34B raised in Q1 2025 alone—but supply still outstrips capacity. Sponsors are leaning into continuation funds, but it’s not enough to fix a market frozen by valuation gaps and post-ZIRP hangovers. Some sectors, like industrial and healthcare, are nearly glacial. The thaw? Likely slow, selective, and contingent on a major rebalancing of risk and return. (More)

DEAL OF THE WEEK

PE’s $8.9B Power Play

Nordic Capital and Astorg are cashing out big. The duo agreed to sell Clario, a digital clinical-trials powerhouse, to Thermo Fisher Scientific for $8.9 billion—the largest healthcare PE exit announced globally in 2025. Also heading to the finish line: Novo Holdings and Cinven, who are exiting alongside.
Formed in 2021 from the merger of ERT and Bioclinica, Clario has since doubled revenue to $1.2B, fueled by AI-driven analytics and strategic add-ons like WCG’s eCOA unit and NeuroRx. The company’s tech supports 70% of FDA and EMA drug approvals—a stat that practically sells itself.
Thermo Fisher isn’t just buying software; it’s buying the infrastructure of clinical validation. The deal closes by mid-2026, marking a rare full-stack digital health exit that’s as scientific as it is strategic. (More)

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PRIVATE CREDIT

Private Credit’s Growing Pains

Private credit managers are finding that scale comes with strain. According to SRS Acquiom/Debtwire, 43% of respondents now cite resource-intensive management as their top concern, followed by the variety of fund structures (41%) and the complexity of funds holding hundreds of loans (41%).
Ironically, the talent shortage that plagued the sector a few years ago has eased—down from 42% to 35%—thanks to a wave of ex-investment bankers and PE pros flooding into credit.
Now the challenge isn’t people—it’s products. The boom in evergreen funds and open-end vehicles from firms like Ares, Apollo, and KKR has created a liquidity management puzzle that’s anything but simple. The industry’s scaling up, but the spreadsheets are sweating. (More)

MICROSURVEY

MACROVIEW

Rate Cuts and Trade Truces: Macro’s Mixed Signals

Two moves, one theme: strategic ambiguity. The Federal Reserve just cut rates to 3.75–4.00%, but Chair Powell admits they’re “flying blind” thanks to a data drought from the shutdown. Meanwhile, the U.S.–China truce looks more like détente than resolution. Both are classic game-theory plays: the Fed signaling without full information; China and the U.S. entering a fragile Nash equilibrium that could collapse with one misstep. For PE investors, this is borrowed time—rate relief may not last, and trade calm is temporary. Credibility is the new currency. Misread the signal, and you're pricing deals in the fog. (More)

THIS WEEK IN HISTORY

The Election That Minted Modern Money

The 1896 election wasn’t just a showdown between McKinley and Bryan — it was a full-blown referendum on how to fix the economy after the Panic of 1893 cratered markets and confidence. With one in five Americans unemployed, Bryan rallied the debt-ridden masses around “free silver” and railed against the gold standard as a gilded noose. McKinley? He offered gold-backed stability (and tariffs), with big business footing his campaign tab. Voters picked order over outrage, gold over silver. The result: the free silver movement died, the U.S. economy industrialized.

COMPLIANCE CORNER

Continuation Funds: The SEC Is Watching

Continuation funds have become a go-to liquidity tool in private markets—exit markets are tight, and GPs want to hold on to star assets. But regulatory scrutiny is ramping up.

A continuation fund is a GP-led secondary transaction where a sponsor rolls existing portfolio assets into a new vehicle they continue to manage. It's a clever workaround for illiquidity—but it’s also a breeding ground for conflicts of interest. In September 2023, the SEC penalized a PE adviser for failing to disclose such conflicts, violating fiduciary duties, and not obtaining investor consent when transferring assets between funds.

Under Section 206(3) of the Advisers Act, affiliated transactions (like a fund selling to itself) may be considered principal transactions, triggering strict consent and disclosure requirements.

Key areas of compliance risk include:

• Valuation fairness, especially when GPs sit on both sides of the deal.
  

• Expense allocation, which must match fund documents.
  

• Governance transparency, including LPAC engagement and investor notice.

Takeaway: As continuation funds grow—exit value expected to hit $9B in 2024—so does regulatory risk. GPs need airtight compliance processes and clear documentation to stay out of the SEC’s crosshairs. (More)

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TWEET OF THE WEEK

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