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The Great Recalibration: Liquidity, Discipline,
and a More Selective Opportunity Set

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Discipline and Conviction: Enduring Disciplines
Amid Shifting Investment Dynamics

A NOTE FROM JEFF DIEHL

Private markets continue to present a compelling opportunity for long-term investors, according to our sixth annual survey of limited partners (LPs). Respondents cite active ownership, aligned incentives, and the ability to influence company-level strategy as defining attributes of the asset class.

The vast majority of participants continue to expect private markets to outperform public markets over time. Investors say they are more likely to direct capital to managers with a demonstrated ability to generate repeatable alpha by backing innovative, fast-growing companies in expanding markets, rather than relying on cost reductions or leverage-driven multiple expansion.

Respondents express understandable concern about the ongoing lack of liquidity. Distributions have yet to recover meaningfully, even as deal activity shows improvement. In response, LPs and general partners (GPs) are making greater use of the secondary market to rebalance portfolios and generate liquidity.

Encouragingly, there are signs that the exit environment is improving, with 202 listings raising $44 billion, making 2025 the strongest year for US IPOs since 2021.1 Combined with expectations for large 2026 offerings from companies such as SpaceX, OpenAI, and Anthropic, this supports our view that this exit channel will continue to strengthen. A healthier IPO market can create competitive tension for mergers and acquisitions (M&A), given the relative ease of acquiring a meaningful stake in a private company compared to a publicly traded one.

Historically, we have witnessed technology advancements creating tailwinds for private companies, as unlisted businesses are less concerned than their public peers about the “innovator’s dilemma,” quarterly results, or a daily stock price. We view AI as delivering another wave of innovation that can benefit private companies, while also allowing managers to integrate this new technology into their sourcing, diligence, risk management, and value-creation playbooks.

Geographic preferences are shifting as well. For the first time in our survey, Europe supplants North America as the most attractive destination for private markets capital, driven by the steady institutionalization of Europe’s alternative investments ecosystem.

I opened last year’s survey by noting that turbulence is a fact of life for private markets investment managers, and there is little indication that volatility will abate any time soon. In our experience, volatility favors GPs with strong deal access, disciplined underwriting, and deep sector knowledge, particularly in the small and mid-market, where inefficiencies can create opportunity.

Looking ahead, more realistic valuation expectations and pent-up demand for liquidity are likely to support further recovery in deal activity. Historically, liquidity has rebounded strongly after prolonged periods of suppression, and we believe the current environment is likely to favor investors with a long-term perspective and a focus on durable value creation.

Jeff Diehl
Managing Partner & Head of Investments
Adams Street Partners

Inside the Minds of Investors:
Key Survey Insights and Emerging Themes

84
%

of LPs expect private markets to
outperform public markets

LPs expect private markets to outperform public markets long term, underscoring durable conviction despite softer sentiment and constrained distributions2

61
%

of LPs cite Europe as the most attractive
region for private market investment

Europe has emerged as the most attractive region for private markets investment, overtaking North America (54%), amid valuation appeal, policy support, and mid-market opportunity2

72
%

of LPs favor middle market funds over
large and mega buyouts

Middle market funds are favored over large and mega buyouts by 72% of LPs, reflecting a premium on operational value creation and sector specialization2

Download the 2026 Global Investor Survey report or read the full press release to learn about key insights from global investors, revealing expectations for increased dealmaking, liquidity, and capital deployment in the coming year.

Download the Report       Read Press Release

Resilience Amid Global Shifts

Investor conviction in private markets remains intact, even as liquidity constraints shape near-term decision-making. Eighty-four percent of LPs expect private markets to outperform public markets over the long term, citing governance, alignment, and control over value creation. Three-quarters view the asset class as less volatile, reinforcing its role as a stabilizing force in institutional portfolios.

According to PitchBook,3 dealmaking rebounded meaningfully in 2025, with global deal value rising 23% and exit value rising 50% year-over-year, signaling that liquidity is gradually returning. Yet this recovery is being met with discipline, not exuberance. LPs are adjusting pacing, reassessing allocations, and consolidating relationships with high-conviction managers. Fundraising has softened, and capital is flowing selectively toward strategies with clear underwriting rigor and alignment.

The message from respondents is clear: private markets remain compelling, but in a more demanding cycle, success will likely favor investors who combine long-term conviction with precision, discipline, and proactive liquidity management.

Investor Sentiment on Private Markets2
To what extent do you agree or disagree with the following statements?

 

Europe Steadies, North America Slips2
Which geographic regions do you expect to offer the best private market investment opportunities in 2026? Respondents ranked their top three.

 

Europe Ascendant, Geopolitics Repriced

Europe has emerged as the most attractive region for private markets investment, cited by 61% of LPs, overtaking North America at 54%. For many investors, this reflects more than cyclical rotation. A maturing GP base, repeat founders, deeper technical talent, and globally scaled companies have transformed Europe into what they view as a structurally stronger ecosystem—particularly across software, AI, and deep technology.

Policy support and valuation discipline further reinforce the region’s appeal, from defense and cybersecurity to private credit, where yields and reporting standards are viewed as comparatively resilient.

North America remains core, supported by scale and long-term performance. However, US political instability and US–China tensions rank among the top geopolitical concerns shaping allocation decisions.

In a more fragmented world, LPs are reassessing concentration risk and leaning toward geographies where policy clarity, sector depth, and institutional maturity are positioned to support durable value creation.

Liquidity as a Strategy

Liquidity remains the defining constraint for private markets. With distributions below historical norms, 74% of LPs expect liquidity pressures to shape strategy this year. Exit timelines are extending, dry powder remains elevated, and sponsors face mounting pressure to deploy capital while accelerating realizations.

In response, liquidity is being actively engineered rather than passively awaited. Secondaries have become a core portfolio management tool, with 43% of LPs prioritizing asset sales and fundraising reaching record levels. Continuation vehicles and structured solutions are now embedded in the exit toolkit.

Co-investments are also moving from tactical to structural, valued for fee efficiency, transparency, and deployment precision.

In a market where cash flow drives flexibility, manager selection is increasingly tied to execution—realizations, underwriting discipline, and the ability to convert portfolio value into distributable capital.

Secondaries Volumes Surge4
Transaction Volume ($bn) as of December 31, 2025

 

AI Accounts for $3.3 Trillion in Market Value5
Market value ($tr) by vertical

 

Underwriting an AI Economy

Generative AI has moved from thematic exposure to an underwriting requirement. LPs increasingly expect managers to demonstrate how AI is embedded across sourcing, diligence, and portfolio operations to drive measurable gains in productivity and margin. In 2025, global AI venture deal volume reached $270 billion, 80% more than in 2024,6 underscoring the scale of capital flowing into the space.

At the same time, valuation compression in public software has sharpened investor scrutiny. In our view, disruption risk is uneven. Vertical, mission-critical software—deeply integrated into enterprise workflows—appears more resilient, while standalone, language-heavy point solutions face greater pressure. Replacing embedded systems is complex, and incumbents are actively incorporating AI into their platforms.

 

A SPECIAL THANK YOU TO OUR 2026 GLOBAL INVESTOR SURVEY CONTRIBUTORS
Ryoji Matsuo

Ryoji Matsuo

Chief Investment Officer, Senior Executive Director

Sumitomo Mitsui Banking Corporation Pension Fund

Antonio Rodriguez, CFA, CIPM

Director of Investments

Building Service 32BJ Benefits Funds

Serena Tan

Chief Executive Officer & Co-Founder

Gaia Investment Partners

Frank Wigger

Chief Investment Officer

Asga Pensionskasse
Jeff Akers

Jeff Akers

Partner & Head of Secondary Investments

Adams Street Partners

David Brett

Partner & Head of Co-Investments

Adams Street Partners

James Charalambides

Partner & Head of European Private Credit

Adams Street Partners
Brian Dudley - Adams Street - growth equity team

Brian Dudley

Partner, Growth Equity

Adams Street Partners

Ross Morrison, CA

Partner, Primary Investments

Adams Street Partners
Bill Sacher Partner - Head of Private Credit

Bill Sacher

Partner & Head of Private Credit

Adams Street Partners
ABOUT THE RESEARCH

Over six weeks leading into 2026, Adams Street Partners surveyed 100 limited partners for their views on a variety of topics that were a cause for optimism or concern. Participants included pension funds, institutional accounts, and portfolio managers located in the US, Europe, and APAC. The findings of this research highlight key conclusions on geopolitical risk, opportunities, and the outlook for select strategies, sectors, and geographies.

Download the Report       Read Press Release

1. Renaissance Capital, US IPO Market 2025 Annual Review, January 2, 2026.
2. Adams Street Partners, Global Investor Survey, 2026
3. PitchBook, 2025 Annual Global PE First Look, January 6, 2026
4. Jefferies, Private Capital Advisory, Global Secondary Market Review, January 2026
5. PitchBook, Q4 2025 PitchBook NVCA Venture Monitor: The definitive review of the US venture capital ecosystem, January 2026
6. PitchBook, Q4 2025 Global VC First Look, January 7, 2026

 

Important Considerations: Important Considerations: This information (the “Paper”) is provided for educational purposes only and is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements in this Paper are made as of the date of this Paper unless stated otherwise, and there is no implication that the information contained herein is correct as of any time subsequent to such date. All information has been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. References herein to specific sectors, general partners, companies, or investments are not to be considered a recommendation or solicitation for any such sector, general partner, company, or investment. There can be no guarantee (i) as to the timing or attractiveness of future investment or liquidity opportunities, (ii) that Adams Street will be able to participate in such opportunities or be able to participate at its requested amount, or (iii) that similarly attractive opportunities will be available in the future. This Paper is not intended to be relied upon as investment advice as the investment situation of individuals is highly dependent on circumstances, which necessarily differ and are subject to change. The contents herein are not to be construed as legal, business, or tax advice, and individuals should consult their own attorney, business advisor, and tax advisor as to legal, business, and tax advice. Past performance is not a guarantee of future results and there can be no guarantee against a loss, including a complete loss, of capital. There can be no guarantee that any Adams Street-managed investment vehicle has exposure to particular investments or categories described herein or that the portfolio of such vehicle is consistent with the descriptions provided herein as the level of concentration and overall exposure to existing investments may vary. Existing investors should review statements of their portfolio for more detailed information. Certain information contained herein constitutes “forward-looking statements” that may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Any forward-looking statements included herein are based on Adams Street’s current opinions, assumptions, expectations, beliefs, intentions, estimates or strategies regarding future events, are subject to risks and uncertainties, and are provided for informational purposes only. Actual and future results and trends could differ materially, positively or negatively, from those described or contemplated in such forward-looking statements. Moreover, actual events are difficult to project and often depend upon factors that are beyond the control of Adams Street. No forward-looking statements contained herein constitute a guarantee, promise, projection, forecast or prediction of, or representation as to, the future and actual events may differ materially. Adams Street neither (i) assumes responsibility for the accuracy or completeness of any forward-looking statements, nor (ii) undertakes any obligation to update or revise any forward-looking statements for any reason after the date hereof. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements. Adams Street Partners, LLC is a US investment adviser governed by applicable US laws, which differ from laws in other jurisdictions.

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