As private equity markets adjust after the COVID-era investment boom, ultra-high-net-worth individuals and family offices are well positioned to increase their allocations to the asset class in 2026, especially as institutional investors face temporary liquidity constraints.
Richard Hill, a Partner at Stonehage Fleming Private Markets Advisory, notes differences in behaviour between institutional and private wealth investors. Pension funds and endowments that have been investing in private markets for years usually maintain established allocations of 15% to 20%. These investors are naturally pausing new investments while waiting for distributions from their current holdings, an ordinary part of the private equity cycle, although one that has lasted longer than usual.
“If you’re a pension fund that’s been allocating to private markets for years, you’ve probably got your 15% to 20% allocation,” Hill explains. “Now you’re waiting to see exits coming before deploying more capital.” This creates space for other investors. Private wealth clients are typically well below these allocation levels. “If anything, they’re growing their allocations, or starting from no allocation. It’s a really good opportunity to build your allocation while the market adjusts.”
The opportunity is backed by strong industry data. In its Global M&A trends in private equity and principal investors: 2025 mid-year outlook, PwC shows that two-thirds of growth in private markets assets from now until 2030 will come from high-net-worth individuals and family offices, highlighting both their under-allocated position and the asset class’s promising long-term outlook.
The current environment originates from the extraordinary conditions of 2021 and early 2022, when ultra-low interest rates and pandemic-era liquidity pushed valuations to high levels. As interest rates normalised and market conditions shifted, the typical exit cycle has extended. Industry-wide quarterly distributions to investors in the second quarter of 2025 reached $52-billion, according to MSCI data, reflecting this adjustment period. While this indicates a slower pace than recent years, it is important to recognise that this is a cyclical phenomenon rather than a structural issue. Private equity has endured similar cycles before, and managers with strong track records continue to deliver attractive long-term returns.
Managers have developed various strategies to navigate this period. Continuation vehicles, which lengthen holding periods for promising portfolio companies, have become more common. Secondary markets have also grown in sophistication, offering alternative liquidity channels. These developments, while sometimes debated, reflect the market’s natural evolution and the flexibility of private structures to adapt to changing conditions.
For wealthy investors, the current environment offers several benefits. Hill remains optimistic about the opportunities available. “Structurally, in terms of where the private wealth market is in terms of overall allocation, I’m not worried at all,” he says. The chance to build positions during this adjustment period, when competition for deals might be somewhat lower, presents a potentially attractive entry point. Furthermore, wealthy investors can adopt a truly long-term perspective, unburdened by the quarterly reporting pressures and fund lifecycles that institutional investors encounter.
Successful entrepreneurs who have recently experienced liquidity events are especially well-positioned for private market investing. “An exited entrepreneur may have had all of his or her illiquid assets in the business, and if that’s now sold or there’s been a liquidity event, there’s an opportunity to build a diversified portfolio from nothing,” Hill explains. “These types of individuals are most likely to reinvest in private deals because that’s been their experience.” This entrepreneurial mindset often proves valuable in evaluating opportunities and supporting portfolio companies.
Market conditions today reflect more disciplined valuations compared to the 2021 peak. While some sectors, particularly artificial intelligence, which attracted about 65% of venture capital investment in the first half of 2025, according to Pitchbook, still trade at high valuations, other sectors offer more reasonably valued opportunities. Hill points out, “If 65% of capital is invested in AI, then 30% or 35% is allocated to other sectors,” highlighting potential for interesting opportunities elsewhere.
Hill highlights various sectors where Stonehage Fleming is identifying promising opportunities: enterprise software firms with reliable recurring revenue, circular-economy companies focused on sustainability, battery-storage infrastructure supporting grid modernisation, and entertainment-industry consolidation in Europe. These opportunities typically arise through existing relationships rather than competitive auctions, making them ideal for family office capital that prefers partnership-based approaches and can act swiftly when opportunities present themselves.
Looking ahead, market conditions indicate a gradual normalisation. As IPO and M&A markets continue to reopen, with global M&A activity on track to be the second-highest year on record, according to Bloomberg data, the exit environment should steadily improve. This will naturally restore balance to institutional portfolios, enabling them to deploy more fully, while private wealth investors will have successfully built positions during an opportune window.
For wealthy investors, 2026 will be fertile with opportunities to get in on the private equity action. They could do so by systematically increasing allocations, accessing a wide range of opportunities across sectors and regions, and benefiting from valuations that are more reasonable than those at market peaks. These conditions offer a chance to build well-considered private market portfolios. As the market stabilises in the coming years, early investors might find themselves well-placed to capitalise on both deployment and recovery phases.
Although the current environment poses challenges for some, it provides real opportunities for those with capital, patience, and a long-term outlook.
Disclaimer
Direct private investments are considered high risk investments. Investors are subject to the risks associated with the loss of capital. The value of investments may go down as well as up and you may lose all the money invested.
Past performance is not a guide to future returns.
Issued by Stonehage Fleming Advisory Limited. Authorized and regulated by the Financial Conduct Authority in the UK (FRN. 194929) and by the Financial Sector Conduct Authority in South Africa (FSP No. 52580).
