In recent years, the investment landscape has undergone profound transformation. The era of predictable cycles and established paradigms has given way to an environment defined by volatility and complexity. Since the onset of the COVID-19 pandemic, interest rate cycles have shifted, inflationary pressures have eroded margins, global supply chains have faced persistent disruptions, and geopolitical tensions (from trade disputes to regional conflicts) have introduced additional layers of uncertainty.
Private equity, as an asset class with long-term horizons and a focus on value creation, operates at the centre of these macroeconomic trends. Our discipline is predicated on the ability to underwrite future outcomes with a degree of confidence, a principle that is increasingly challenged in today’s climate. Yet, it is precisely this environment that presents compelling opportunities for discerning investors.
Market Dynamics and Opportunity
Private equity deal activity has decelerated, exit opportunities have become less frequent, and overall market liquidity has tightened. While these conditions may initially appear adverse, they have also fostered a landscape in which disciplined and selective investors can differentiate themselves. Valuation dislocations and a more cautious stance among industry participants have created unique entry points.
Fundraising challenges are material. Recent data indicates that global private equity fundraising reached approximately $592 billion in the twelve months to June 2025, representing the weakest performance in seven years. Limited partners (LPs) have moderated their commitments and sought fee concessions, while distributions to LPs have also declined - only around 11% of global buyout distributions as a percentage of net asset value were returned in 2024, the lowest percentage since 2009. The convergence of these trends has resulted in heightened investor caution.
The industry is also increasingly bifurcated. At the top, mega-managers possess substantial fundraising capabilities and considerable reserves of dry powder. However, scale and alpha are often at odds with each other, and the challenge for these firms lies in prudent capital deployment without compromising returns.
Conversely, highly specialised managers with strong sector, regional, or thematic focus are demonstrating robust performance. By leveraging advanced analytics, building internal operational teams, and prioritising value creation strategies, these funds are capturing opportunities across market dislocations. Funds, lacking either the scale or the differentiation of their peers, face the most significant headwinds.
Prioritising Discipline and Patience
In today’s environment, it can be tempting to chase novel opportunities. However, we believe that enduring success depends on discipline, patience and a rigorous approach to risk-adjusted decision-making.
Resisting the allure of emerging technologies and short-term trends is critical. Artificial Intelligence (AI) is a prime example: while the sector is attracting significant capital, many use cases remain unproven, and its enduring value may ultimately reside within its enabling infrastructure rather than speculative platform bets. Our focus remains on sustainable value creation, rather than the latest trend.
Exit Strategies and Liquidity Solutions
The ability to execute successful exits remains a central challenge for the industry. With public markets less accessible, holding periods have lengthened, and sponsor-to-sponsor transactions have become more prevalent. Notably, both investment and exit activity experienced a rebound in 2024 as interest rate volatility moderated and deal-making resumed. The bar for raising new funds, however, is now higher, and liquidity constraints are driving the increased utilisation of secondaries, continuation funds, and NAV financing.
Such innovative structures have proven instrumental in bridging liquidity gaps and returning capital to investors amid challenging exit environments. Ultimately, a period of greater macroeconomic stability will be necessary for a broader recovery in exit volumes.
Growth in Co-Investments
Co-investments continue to represent a significant growth area, having expanded nearly tenfold over the past decade. For LPs, co-investments offer reduced fee structures; for general partners, they foster lasting, strategic relationships. In the current liquidity-constrained environment, the prevalence and quality of co-investment opportunities remain notable, constituting a rare area of mutual benefit.
Long-Term Perspective and Strategy
Private equity’s paradox is most evident in times of uncertainty: while the asset class depends on predictability, it often achieves its best performance in volatile markets. Market dislocations create entry points, specialisation uncovers persistent inefficiencies, and disciplined investors are uniquely positioned to capitalise on these dynamics.
For South African and global allocators alike, the imperative is clear: maintain focus and discipline. The most attractive opportunities are seldom found in the glare of headlines, but rather in the less conspicuous sectors of the market - available to those with differentiated capabilities, conviction, and a steadfast approach to risk management.
At Old Mutual Alternative Investments, we are committed to identifying and executing transactions that align with our long-term investment philosophy. Our approach is not driven by transient market themes, but by a dedication to delivering superior returns across market cycles.