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Private equity trends 2026: leading through change

Private equity enters 2026 with opportunities to embrace tech, credit and diversification to drive growth and reshape the industry’s future.

In brief:

  • Private equity firms can leverage technology and innovative strategies to drive growth and adapt to evolving market dynamics.
  • Diversification among investors and new fund structures are expanding access, with regulatory changes enabling broader participation.
  • The sector focus is shifting toward tech, industrials and insurance, with strategic exits and creative deal structures shaping the industry’s future.

Private equity industry outlook

Private equity (PE) enters 2026 with renewed confidence and clear momentum. After navigating years of macro uncertainty and structural shifts, firms have emerged stronger, more resilient and more innovative. While some geopolitical and regulatory dynamics remain, the industry is firmly on the front foot — recalibrating operating models, expanding investor access and doubling down on technology to unlock new value. This year’s trends reflect a sector evolving from adaptation to actively reshaping its future.

How EY can help

1. Private credit: high yield to investment grade and beyond

 

Private credit is becoming central to the PE ecosystem, with the US market doubling since 2019 to nearly $1.3 trillion and over $400 billion in dry powder.1 While recent bankruptcies underscore the need for disciplined underwriting, the broader credit environment remains subdued for leveraged loans. As private credit expands beyond traditional structures, the $40 trillion investment-grade segment presents a major opportunity.

 

The lines between banks and private lenders are also blurring, with banks increasingly lending to private credit funds. This shift reflects a broader rebalancing: Borrowers are prioritizing speed, certainty and customization over conventional financing routes. As supply and demand dynamics evolve, private credit offers a flexible, proactive alternative across borrower segments and significant growth opportunities for PE.

 

2. Evolving the PE lifecycle through technology

 

PE firms are accelerating transformation, embedding technology across the investment lifecycle to meet rising investor and stakeholder expectations. As fundraising concentrates among the largest firms, LPs are prioritizing scale, operational sophistication and platform capabilities. Mid-market firms, meanwhile, are differentiating through specialization, agility and deep sector expertise. Regardless of size, success now hinges on the clarity of the strategy, disciplined execution and the ability to deliver value — enabled by data, technology and AI.

 

Rather than employing discrete functional use cases, leading firms are rethinking how AI can be applied across the entire value chain — from sourcing to exit. This shift reflects a broader evolution from technology as an efficiency play to a strategic enabler of differentiated value creation. Firms are investing in proprietary platforms, predictive analytics and digital infrastructure to unlock new performance levers.

 

They are also recruiting data scientists and AI specialists. According to our latest Private Equity Pulse survey, 53% of PE firms expect to hire more specialists in digital transformation than in prior years, and 51% said they are seeking more data scientists and experts in AI.

 

3. LP diversification: retail, retirement and sovereign surge

 

Limited partner profiles are diversifying rapidly. Semiliquid funds continue to grow, offering broader access to private markets. With this shift, regulators and industry bodies are increasingly focused on ensuring transparency, education and appropriate investor protections.

 

The U.S. Department of Labor’s 2025 rescission has helped open the door for potential 401(k) access to private markets. The third quarter EY Private Equity Pulse notes that 90% of general partners are at least “somewhat interested” in developing defined contribution products, with 24% already designing offerings. Large plans are expected to pilot private market sleeves in target date funds, likely starting with private credit and tightly capped for liquidity. Record-keepers and fiduciaries will push for stronger valuation and operational disclosures, reshaping the fund design and governance.

 

At the same time, sovereign wealth funds (SWFs) are becoming increasingly active participants in PE. The largest buyout of 2025 involved SWF capital, and their US presence continues to expand. These investors are evolving from passive allocators to strategic partners, coinvesting and shaping the portfolio strategy to drive long-term value creation.

4. Exits: IPOs rebound, but continuation funds still key

After years of dislocation, the exit environment appears to be stabilizing. In the third quarter of 2025, PE-backed IPOs hit their highest level since 2021, with proceeds up 68% year over year. Bid-ask spreads are narrowing, and the Federal Reserve’s signal of two rate cuts in 2025 has improved the modeling confidence.

Still, exits remain uneven, with longer holding periods and continued valuation gaps. Firms are using continuation funds and sponsor-to-sponsor sales to manage their aging assets. In this environment, strategic agility is key. Firms must weigh IPO visibility against M&A certainty and secondary liquidity. Continuation vehicles, creative structures and dual-track strategies will remain vital tools in 2026.

5. Sector focus: tech, industrials and insurance

Tech remains resilient. Its limited exposure to tariff volatility, the intensifying race to lead in AI and a declining rate environment continue to support investments in SaaS, cloud and AI-native platforms. The technology, media and telecommunications (TMT) sector leads global IPO pipelines, with much of the volume originating in the US. PE firms are targeting mature, earnings-generating tech companies with strong post-listing visibility, reflecting a shift toward quality over quantity.

Interest in industrials and energy continues to build, driven by a stable demand, strong domestic exposure and AI growth. These sectors, once viewed as traditional, are now central to digital infrastructure strategies. Data centers are a critical part of this equation, with PE deal teams treating grid access, on-site generation and long-duration storage as foundational to AI capacity builds. Power procurement is emerging as a key value-creation lever.

Insurance is becoming a strategic moat for credit-focused firms. Large players have embedded insurance capabilities to stabilize their returns and manage the duration risk. Second-tier firms are following suit, leveraging insurance platforms to diversify their funding sources and enhance resiliency. There is growing interest in using insurance-linked vehicles to support credit strategies, especially in volatile rate environments.

Looking ahead

These trends are markers of an industry that’s actively shaping its own future amid complexity. As the industry continues to evolve — through technology, diversification and sector specialization — firms that embrace agility and innovation will be best positioned to thrive.


Summary

PE is set for strategic growth in 2026, with firms leveraging technology, data and innovative deal structures to drive performance. The sector focus is shifting toward tech, industrials and insurance, while investor profiles diversify and IPO activity rebounds.

Amid ongoing market complexity, successful firms will be those that embrace agility, operational excellence and creative approaches to value creation. The outlook is optimistic: resilient balance sheets, improving financing conditions and a surge in large deals position PE for continued momentum and leadership in the evolving investment landscape.

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