Private Equity

The private equity (PE) industry is constantly changing as a result of bear and bull markets, government legislation, business trends, globalization, and many other factors. Another major trend is the increasing specialization of firms. “The proliferation of sector-focused funds continues and we don’t expect that to change,” says Andrea Auerbach, global head of private investments at Cambridge Associates and co-author of the Declaring a Major report. “Our data shows firms with sector specialization have a competitive advantage.” According to The Future of Private Equity-2026 Outlook from West Monroe Partners, the PE industry is focusing on the following “high-velocity” sectors: residential and essential services, defense and aerospace, home health, biotech and pharma services (from clinical research to contract manufacturing), and software (especially firms with proprietary data assets and embedded AI capabilities). A second trend is the increasing use of data analytics, artificial intelligence, and blockchain technology (which can be defined as a distributed ledger database that maintain a continuously-growing list of financial records that cannot be altered) to improve efficiency, better ensure the accuracy of data, and solve other problems both in-house and at portfolio companies. These aforementioned technologies—along with cryptocurrencies, nonfungible tokens, the metaverse, and other technologies are sometimes referred to as Web 3.0.) 

Another trend is the growing focus on environmental, social, and governance investing (ESG) investment vehicles and strategies. “Private equity firms are increasingly incorporating ESG factors into their investment strategies as a way to balance financial returns with considerations for the public good,” according to CEPRES, a major platform for private market data and analytic. “With investors now focused on ESG issues more than ever, private equity firms are increasingly adopting frameworks and standards to measure and report the impact of their investments, from an ESG perspective. What’s more, some private equity firms are actively engaging with their portfolio companies by encouraging them to adopt sustainable business practices, improve social responsibility, and enhance corporate governance.”

Finally, large PE firms—such as The Carlyle Group and Blackstone—are launching buyout funds that have a longer holding period than the traditional three to five years. These funds have expected holding periods of 10 to 15 years. “Private equity firms are holding portfolio companies longer as valuations have not increased as expected,” according to S&P Global Market Intelligence. “To increase valuations, firms pursue add-on acquisitions, grow the business organically, and divest noncore operations, extending the holding period.” These are only a few of the trends and developments that will shape the future of the industry.

More High-Wealth Individuals Are Investing with Private Equity Firms

Fund managers are seeking to combat thinning profit margins by targeting high-wealth investors. Globally, high net-worth individuals had more than $90.4 trillion in assets at the end of 2024, according to Capgemini, up from nearly $63.4 trillion in 2016. “This vast, untapped market has become increasingly attractive to alternative asset managers seeking to sustain double-digit growth even as the industry matures,” according to Bain & Company’s Global Private Equity Report 2023. “The reverse is also true: Wealthy individuals (not to mention their advisers) are increasingly drawn to alternative investments as they look for new diversification options and better returns than they can get in the traditional markets for public equity and debt.”

Private Equity Firms Increasingly Focus on Small Businesses

Much attention is given to the takeovers of large corporations by PE firms, but the industry recently has begun to focus on smaller companies. “Today 85 percent of PE investments are in firms with fewer than 500 staff,” according to a 2026 article about the trend in The Economist. “Over the past few years the industry has been hoovering up small service-providers, from coffee shops and nail salons to pest controllers. Local service-providers are attractive to PE because they are largely internet-proof. Often a handful of such businesses are acquired and merged into a chain.” One example of this trend is car-wash chains. In 2016, private equity firms owned only two of the 10 biggest car-wash chains in the United States. As of early 2026, they owned all 10 chains. The Economist also reports that private equity firms also now own 12 percent of dental offices, 10 percent of childcare centers, and 5 percent of nursing homes. Opponents of such purchases (especially of healthcare–related companies) believe that private equity companies cause the quality of care to diminish in their zest to increase efficiency and profitability. But proponents argue, according to The Economist, that “the financial firepower provided by a PE backer may be just what a small business needs to thrive, especially when it is trying to compete against big incumbents.”

Regulatory Peaks and Valleys

The private equity industry was largely unregulated for decades. That changed in 2010 with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires all private equity firms with more than $150 million in assets under management to register with the Securities and Exchange Commission (SEC) and to hire a chief compliance officer to create and monitor a compliance program, disclose more information about investor agreements, and submit to regular SEC inspections, among other rules. Additionally, the Volcker Rule, a regulation in Dodd-Frank, restricts banks from conducting certain investment activities with their own funds and prohibits them from investing in or sponsoring venture capital, private equity, or hedge funds. In 2020, SEC loosened this rule for venture capital firms as long as the VC firm did not engage in proprietary trading and met other requirements.

One recent piece of legislation, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018, rolled back parts of Dodd-Frank for smaller banks. The act changed the financial threshold in which banks could be classified as “systematically important financial institutions” from those that had more than $50 billion in assets to those with $250 billion in assets. Additionally, the act also provides smaller banks with relief from the Volcker Rule. Banks with less than $10 billion in assets may now invest in or sponsor private equity or hedge funds and engage in proprietary trading.

In 2023, the SEC adopted amendments to Form PF (the confidential reporting form for certain SEC-registered investment advisers to private funds.) The amendments would require all private equity fund advisers to file current reports regarding the occurrence of reporting events that could indicate significant stress at a fund or investor harm. Reporting events for private equity fund advisers include certain fund termination events, the removal of a general partner, and the occurrence of an adviser-led secondary transaction. In September 2025, the SEC and the Commodity Futures Trading Commission jointly granted a one-year extension to the compliance date for amendments to Form PF—extending the deadline from October 1, 2025, to October 1, 2026. The extension was granted because of a January 20, 2025, Presidential Memorandum from President Trump that asked agencies to consider delaying or postponing the effective date of rules not yet in effect in order for them to be reviewed by the administration. 

The Tax Cut and Jobs Act of 2017 also had an effect on the financial industry. Experts believe that it helps PE portfolio companies as a result of the reduction of the corporate tax rate from 35 percent to 21 percent and other changes.

The CHIPS and Science Act of 2022 earmarked $280 billion for domestic semiconductor science and production through 2032, including $200 billion for research and $52 billion targeted at manufacturing. The act also created a 25 percent tax credit for companies that invested in advanced chipmaking facilities. S&P Global Market Intelligence says that this “U.S. effort to bolster domestic semiconductor manufacturing is likely to spur more private equity investment in the capital-intensive industry and the businesses that support it.”

The One Big Beautiful Bill Act (OBBBA) of 2025 extended many of the taxpayer-friendly provisions of the Tax Cuts and Jobs Act (passed in President Trump’s first term), as well as implemented many pro-business provisions. “The OBBBA brings some of the most significant tax updates for private equity in recent years,” according to Warren Averett, a firm that provides audit, tax, accounting, and consulting services. “Each provision carries new opportunities and considerations for deal structuring, entity selection and tax planning across the investment lifecycle.”

In recent years, the Republican-led Congress and the Trump Administration reversed some of the provisions of Dodd-Frank and reduced regulation of the private equity and other alternative investment industries. But the administration is also seeking to increase access to private equity and other alternative investments by everyday investors via their 401(k) funds.

It’s important to keep in mind that regulation of the alternative investment industry by the SEC and Congress waxes and wanes depending on which political party controls Congress and the White House.

Interest Continues in the Tech Sector

Technology accounted for the largest share of private equity deal activity by value in 2025, with approximately 25 percent of all PE–backed transactions attributed to this sector, according to Cherry Bekaert, a certified public accounting firm. “Private equity continues to back tech, with investor citing long-term trends, digital transformation, and defensible revenue streams as key drivers,” according to Investing in Technology, a November 2025 report from Private Equity International. “Funds with a technology focus continue to attract LP capital as tech products and services increasingly become a must-have across industry verticals.” Cherry Bekaert reports that major areas of focus for PE firms and investors include:

• artificial intelligence
• software and analytics firms with strong recurring revenue (especially those leveraging AI)
• cybersecurity
• healthcare technology
• enterprise software
• identity, authentication, and governance platforms
• semiconductors

Private equity firms are also making major investments in U.S. data centers. In 2025, PE firm investments accounted for 72 percent of the overall $63.35 billion investment in the nation’s data center space, according to S&P Global Market Intelligence data.

Clean energy technology is another area of focus. Private equity investment in clean technology industry growth/expansion increased to $22.5 billion in 2025, up from roughly $11.6 billion in 2023, according to a report from PitchBook. The provider of private market data says that “investors are moving away from pure-play renewables toward anything that can help generate stable, sustainable power capacity.” Increasing demand for power due to the use of advanced AI technology, rising industrial use of electricity, data center expansion, and continued adoption of electric vehicles is causing countries and companies and other organizations to seek alternatives to fossil fuels and invest in both clean energy companies and energy infrastructure businesses.

Growing Concerns About Cybersecurity

In recent years, high-profile data breaches have spurred alternative investment firms to spend more of their budgets to ensure that data and intellectual property is protected from cybercriminals. The U.S. Securities & Exchange Commission, other federal agencies, and foreign regulatory agencies are also pressuring private equity, venture capital, and other alternative asset management firms to focus more on cybersecurity. . “The volume and frequency of transactions conducted by private equity firms often make them appealing targets of cyber threat actors at a time when the cybersecurity risk and regulatory landscapes are evolving globally,” according to Skadden, Arps, Slate, Meagher & Flom LLP. “Cyber resilience has quickly become a component PE firms must assess when considering investing in startups and mid-market companies.” 

The criminal use of artificial intelligence (especially generative AI) is a major concern. For example, the ChatGPT generative AI tool allows attackers to craft better phishing e-mails and better e-mail business compromise attacks. Other ongoing security issues include ransomware, cloud misconfiguration (which may allow unplanned public access and dramatically increase the chance of a security breach), viruses, spyware, malware, and denial-of-service attacks.

Investors such as pension funds and endowments are also pressuring private equity firms to institute stringent cybersecurity protocols. Cybercriminals steal or destroy data, conduct ransomware attacks, and commit other acts that force the private equity firm to lose control of investor or in-house data. Look for private equity firms to ramp up their cybersecurity budgets in coming years to address these threats. This will increase demand for information security experts. Job opportunities for information security specialists who work in the finance sector are expected to grow by 27.2 percent from 2024 through 2034, according to the U.S. Department of Labor. This is much faster than the average for all careers. 

Private equity chief financial offers (CFOs) are much more confident about their firms’ protection from cyberthreats than investors are, according to the 2023 Global Private Equity Survey from EY. Only 18 percent of CFOs in the Americas cited cybersecurity risks as their biggest future worry. According to commentary by EY in another CFO survey, “This exuberant optimism [by managers] is likely misplaced as most security experts acknowledge that preventing a cyberattack is nearly impossible; rather, firms should be focused on their ability to detect cyber irregularities and respond in a timely fashion to any incidents.”

The Growing Use of Data Analytics and Alternative Data

The private equity industry has traditionally been a low-tech field. The amount of data that was collected and analyzed was much lower than in other financial industries, especially the liquid assets industry. But that has changed in recent years as some firms have established relational databases and developed proprietary data collection and analytical applications fueled by advanced artificial intelligence and machine learning (to process both structured and unstructured data). The growing size of PE firms, the increasing amount and variety of data that can be harvested, and client demand (especially from pension funds, insurance companies, and other institutional investors) are making data analytics an integral part of any PE operation. Eighty-three percent of senior executives from U.S. PE firms with at least $2 billion assets under management who were surveyed by S&P Global Market Intelligence in 2022 reported that big data and data analytics had become more important over the past two years. “Broadly, PE firms are ramping up their technical sophistication,” says S&P Global. “Firms are investing in more sophisticated tools to source, validate, store, and manage data as they confront issues like data fragmentation and sprawl. For example, enterprise data management software is becoming a must-have, with 83 percent of respondents already reporting that they utilize some form of data management utility.”

To address their data needs, some funds are developing their own data analytics software, others are purchasing portfolio companies that offer this technology, and others are using third-party service providers to address their data needs. Still others are building or expanding in-house data science and analytics teams that are separate from information technology departments. Many smaller private equity funds are hiring consulting firms with both knowledge of the PE industry and data collection and analytics acumen to tackle their data needs.

Another trend is the practice of using data analytics tools to collect and study alternative data to identify potential investment targets, use new financial metrics to determine valuations, and to obtain other benefits over their competitors. Alternative data, which is also known as next-generation data, is nontraditional and non-market economic and financial information, such as weather patterns, satellite imagery, business performance metrics, online reviews, consumer spending/lifestyle data (including payments data), and social media trends. 

More Private Equity Firms Using Generative Artificial Intelligence

Generative artificial intelligence (AI) is one of the newest technologies being used by the private equity industry and their portfolio companies. It is a form of machine learning algorithms (including large language models) that can be used to create new content (including text, simulations, videos, images, audio, and computer code), as well as analyze and organize vast amounts of data and other information. Eighty-two percent of PE general partners who were surveyed by the software company Allvue Systems in the fourth quarter of 2024 said that they were using some form of artificial intelligence (up from 47 percent who said so a year earlier). General partners believed that AI would help them to stand out in the following areas:

• more efficient operations: cited by 31 percent of respondents
• better data management and reporting: 23 percent
• improved decision-making: 18 percent
• better risk management: 17 percent
• stronger client support: 12 percent

Generative AI is still in the preliminary stages of use and deployment, and companies are still trying to address the ethical issues, security risks, and operational challenges of using this technology. Information accuracy is also a major issue because the results created by generative AI are only good as the source information it uses, and there are fears that the use of generative AI will exacerbate systemic biases. Job loss is also a concern. “As with every new technology, the rising adoption of AI will inevitably render many jobs at a PE or VC firm obsolete,” according to PitchBook. “Administrative roles in particular are most likely to be impacted.” On the other hand, the use of generative AI will create the need for many new occupations. These include generative AI utilization directors, implementation specialists, product and adoption managers, quality controllers, editors, engineers and software architects, and output auditors. The use of AI is also forcing current PE professionals to learn new skills. “People who can prompt well, challenge outputs, and build workflows around AI are standing out, while others risk falling behind,” says Liam Grier, a founder and director at Inicio Talent, a recruitment firm that specializes in private equity, in Advanced Technologies and AI, a report from Private Equity International. “Tech-savvy operators are climbing faster, and traditional linear career paths are being disrupted, especially in finance, data, and operations.”  

Competition for Top Talent Increases

With so much money at stake, private equity and other alternative asset firms continuously seek to hire the best-qualified employees to help them gain a competitive edge. Today, PE firms are not only competing with other firms, but also with hedge funds, venture capital firms, the investment banking industry, other financial companies, and corporations for top talent. “Individuals with varying skill sets, particularly those familiar with rapidly evolving technology and data analysis, are in such demand that the battle is not yet won in merely employing the talent, but rather the development and retention of these individuals is an increasingly complex dynamic to address,” according to EY. “Managers are embracing a younger, more diverse generation of talent which does not necessarily share the same expectations from their employer than previous generations. Balancing the right mix of compensation and non-compensation-related benefits has never been more critical to maintain a workforce of individuals who can share and someday take over the leadership reins of the organization.” Fifty-six percent of managers of funds of more than $15 billion under management cited “talent management” as their top strategic priority aside from asset growth, according to the 2023 Global Private Equity Survey from EY. The survey found that the most-popular initiatives (other than compensation) that PE managers were using to retain employees included:

• providing flexible work arrangements: 61 percent of managers cited this initiative
• expand job roles and responsibilities: 48 percent
• improved wellness/benefits: 42 percent
• focus on inclusion: 33 percent
• increased visibility with senior management: 30 percent
• promotions: 18 percent

Brand Building Becoming Important for Private Equity Firms

Private equity (PE) funds are facing a much more competitive landscape than in the past. They must compete with other alternative sectors, as well as the mainstream financial sector, for funds. They also must compete with the growing number of PE funds for deals and investor dollars. As a result, more PE firms are focusing on developing or improving their brands to attract clients and develop a stronger reputation in the industry. In fact, 82 percent of PE firms surveyed in 2023 by SuperReturn and BackBay Communications, said that having a strong brand was very important. Eighteen percent said it was somewhat important. “The importance of focusing on building a strong brand to support fundraising and investment success in the private markets cannot be underestimated,” said Bill Haynes, founder and CEO of BackBay Communications. “The number of private equity firms has exploded over the last decade, resulting in a lot of firms chasing a limited number of deals. GPs are looking at how they can make sure they stand out and stay in front of stakeholders across the board, including investors, company owners as well as potential employees. While performance will always be the key to success, differentiation, storytelling, and ongoing communications are becoming a bigger part of the picture.” (BackBay Communications was a public relations, marketing and branding consultancy that specialized in working with private markets firms. It was acquired by Gregory FCA in 2024. SuperReturn is a well-known private equity conference series.)

According to the survey, PE firms say that the following factors are driving the need for a stronger PE brand:

• Competition for deals: cited by 56 percent of respondents, who were asked to select three factors)
• Competition for limited partner dollars: 41 percent
• Increase in numbers of private equity firms in the market: 41 percent
• Recruiting and retaining talent: 19 percent
• Increase public scrutiny/general awareness of the industry: 7 percent
• Increased oversight/regulation: 4 percent
• Other: 4 percent

PE firms gave the following reasons why it was important to have a strong brand:

• Deal sourcing (generate awareness among CEOs and management teams): cited by 67 percent of respondents, who were asked to select three factors)
• Fundraising (generate awareness among limited partners/placement agents): 59 percent
• Deal sourcing (generate awareness among intermediaries): 56 percent
• Talent (recruiting and retaining talent): 44 percent
• Public (public perception/public policy: 11 percent

Demand is expected to increase for marketing workers, investor relations specialists, public relations experts, and information technology professionals with knowledge of the private equity industry.

Here are the employment outlooks (through 2034, according to the U.S. Department of Labor, DOL) for marketing and sales professionals who are employed by funds, trusts, and other financial vehicles:

• market research analysts and marketing specialists: +7.9 percent
• marketing managers: +7.9 percent
• securities, commodities, and financial services sales agents: +4.7 percent

Here are the employment outlooks (through 2034, according to the DOL) for public relations and information technology professionals who are employed by companies that specialize in securities, commodity contracts, and fund, trusts and other financial investments and vehicles and related activities:

• database architects: +6.1 percent
• public relations specialists: +6.1 percent
• web developers: +6.1 percent