Returns, Rates & Roadblocks: The State of Private Markets

Good morning, ! This week we're covering private markets performance during FED rate cuts, semiliquid private equity and VC funds annualized returns, private debt indexes performance vs real estate, and valuation gaps as the number one impediment on today’s activity. 

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DATA DIVE

The Fed’s Playbook Is a Time Machine

The market doesn’t care when the jobless rate peaks—it cares when the Fed blinks. In cycle after cycle, private markets have outperformed by acting on the pivot, not the data lag. The math backs it up: interest rates have a stronger impact on industrial output than employment shocks do. Housing prices react within a quarter, and private credit gains momentum as default fears fade. Meanwhile, the labor market still “looks bad,” creating a perfect backdrop for contrarian plays. If you're still waiting for the job reports to look pretty, you’re already late. The Fed’s signal comes early—and real assets are the first responders.

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TREND OF THE WEEK

The Great Narrowing

After two years of deal gridlock, the valuation gap is finally shrinking—and PE firms are acting like someone just reopened the express lane. EY’s latest GP survey shows two-thirds of respondents say the gap has narrowed, with 61% reporting a moderate contraction. Buyers and sellers are finding common ground, thanks to creative structuring tools like earnouts, tariff-related MAC clauses, and other contingent mechanisms that keep risk in check. Add in a friendlier financing backdrop—direct lenders staying aggressive and syndicated loans hitting a record $404B in Q3—and the market feels more like 2021-lite than the freeze of late 2023. (More)

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LIQUIDITY CORNER

The Illiquidity Premium That Hasn’t Arrived

Semiliquid PE continues to test investor patience. Despite the category’s buzz, most funds trail the S&P 500 — a tough look for vehicles built on the promise of steady access and institutional-quality exposure. Returns skew negative across the board: The Private Shares Fund A (-5.2%), Princeton Everest I (-5.5%), BlackRock Private Investment Inst (-5.3%), and Constitution Capital Access (-10.0%) all illustrate the struggle to deliver an actual illiquidity premium. Venture flavors aren’t immune either, with ARK Venture (-2.9%) and Cashmere (-5.8%). Only Pomona Investment A (+0.4%) and Cascade Private Capital I (+12.0%) show real outperformance — and Cascade’s gains are still largely unrealized. Until durability shows up, semiliquid PE remains long on marketing and short on market-beating returns. (More)

DEAL OF THE WEEK

EQT & CVC Walk Away from $5B AUB Buyout

What could have been one of Australia’s biggest private equity takeouts this year just fell apart. EQT and CVC Capital Partners have walked away from a proposed $5 billion acquisition of AUB Group, a publicly listed insurance broker and underwriter. The firms had offered $45 per share, a healthy 40% premium at the time, but pulled the plug after a month of due diligence.

AUB’s stock promptly fell 17.8% to $30.70, wiping out most of the M&A premium. But institutional investors, including Platypus and Paradice, applauded the board’s refusal to entertain a lower bid. With underlying net profit forecasted to grow up to 13.4% this year and the UK-based Tysers acquisition starting to deliver, investors are betting that AUB is worth more with time.

Why it matters: This deal collapse underscores a key theme in today’s buyout market—valuation discipline is back, on both sides. PE firms are less willing to chase marginal deals in a high-rate world, and public boards—especially those with strong cash flows—are more willing to bet on themselves.

EQT’s “opportunistic” play was timed well, but the market disagreed on value. Expect more bid/ask standoffs like this heading into 2026. (More)

PRIVATE CREDIT

Real Estate Wins Headlines, Private Credit Wins Allocations

Real Estate may have sprinted ahead in total cumulative returns (+85%), but Private Credit proved its mettle with a smoother, less volatile ride. From 2015 to 2025 YTD, Direct Lending (+70%) and Alternative Credit (+67%) held firm, benefiting from institutional demand, higher base rates, and a hunger for non-bank lending. The kicker? Direct Lending edges out Alternative Credit by 9%, but both trail real estate by ~24%. Still, in a rate-sensitive world, private credit's income stability and low correlation to public markets make it a core portfolio play—especially for pension and endowment CIOs who prefer predictability over pizzazz. (More)

MICROSURVEY

MACROVIEW

Black Friday’s $11.8B Illusion: When Fear Fuels Consumption

This year’s Black Friday was a blockbuster — on paper. A record $11.8B in online sales looks like strength… until you zoom in. Order volume fell, while prices jumped 7%, confirming what economists already suspected: inflation, not confidence, is driving the numbers. Consumers aren’t shopping out of joy — they’re hedging against future pain. With inflation expectations back near 4.6%, intertemporal substitution is back in fashion: spend now, worry later. Add AI-assisted shopping and Buy Now, Pay Later (BNPL) to the mix, and the picture looks more like tactical consumption than economic strength. Affluent households are carrying the retail headline, while middle- and lower-income groups are barely keeping up. The Fed will read this as resilience. But private equity and retail operators should read between the lines: this economy’s façade is holding up thanks to psychology and short-term credit. (More)

COMPLIANCE CORNER

S&P Streamlines Credit Compliance for Private Markets

Private credit may be booming, but compliance complexity is booming faster. S&P Global just launched WSO Compliance Insights, a real-time monitoring tool designed to help private credit and CLO managers handle increasingly tangled loan portfolios—without waiting for end-of-day batch reports.

The $3T private credit market (by 2028) isn’t just scaling in size—it’s scaling in legal intricacy. WSO Compliance Insights gives managers a centralized dashboard to visualize compliance breaches, simulate hypothetical trades across CLOs and TRSs, and reconcile results across deals in real-time.

Why it matters: Faster compliance means faster allocation. In a market where portfolio rules are as important as yield, tools like this could become the new baseline. The move also reflects how vendors like S&P Global are racing to become infrastructure players for the private markets stack.

Bottom line: LPs want transparency. GPs want speed. Regulators want evidence. Real-time compliance may become table stakes for credit managers who want to scale—without getting flagged. (More)

THIS WEEK IN HISTORY

The Day Complexity Imploded

This week in 2001, Enron filed for Chapter 11, transforming from a $70B market darling into the poster child for corporate fraud. The company’s collapse exposed how off-balance-sheet entities, mark-to-market fantasies, and conflicted auditing can prop up growth long after real cash flows disappear. The fallout rewired modern governance: Sarbanes-Oxley, stricter audit committee oversight, and an investor base newly skeptical of “too smooth” earnings. For PE, the lesson is evergreen — financial engineering is not a substitute for fundamentals, and opacity is the enemy of durable value. (More)

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