Securing a spot in the best funds has always been a challenge for limited partners. But as private capital returns decline, the uphill battle is fought on ever steeper ground.
The allocation game has always been one of access: the more money, the beefier the staff and longer the track record of an endowment, pension or family office, the more likely it is to secure a spot in a top-quartile manager’s latest fund.
This year, allocators are feeling the weight of this challenge more acutely.
Nearly a third of respondents to a survey of asset owners conducted by investment management firm Northern Trust said the biggest constraint to increasing their private markets exposure is gaining entry to their top fund picks. That’s up from 18% of respondents in 2025.
This is particularly true among smaller allocators, which likely have less of a budget for top-tier investment talent.
Among respondents who cited access as a challenge, nearly half had AUM of $1 billion or less.
In addition to staff-level challenges, LPs are hitting the access wall because more are entering the private markets for the first time, without established relationships with fund managers.
According to the survey, 94% of asset owners said they invest in private markets, up from 86% in 2025. Private equity represented the largest of their exposure to all private market asset classes.
“A lot of our clients, particularly the little ones, say manager due diligence is a massive time suck for them, so taking the time to diligence your existing managers and keep tabs on them while also going out and looking for the next greatest opportunity—it’s just a lot of work,” said Katherine McCabe, head of Northern Trust’s outsourced chief investment officer business.
In a period that many are calling the end of PE’s golden age and questioning private market returns, getting into the best funds is more important to LPs than ever.
In 2023, Jeffrey Jaensubhakij, CIO at the time of Singaporean sovereign wealth fund GIC, one of the largest institutional investors in the world, told the Financial Times that market volatility, higher interest rates and declining valuations have ushered in the end of a lucrative era for the asset class.
As of Sept. 30, 2025, private equity was the asset class with the steepest decline in returns over the past year compared with its performance over the last decade, according to PitchBook’s latest Global Fund Performance Report.
From returns over the past 10-year period to the past one-year period, PE horizon internal rates of return dropped 8.7 percentage points, the greatest decline out of returns for VC, real estate, real assets, private debt, fund-of-funds and secondaries, per the report.
Recent News
Why Wall Street wants to trade AI compute like oil
Conditions have been kind to PE returns. Why haven’t portfolios delivered?
As PE returns slide, the dispersion of returns between funds and managers is also widening.
For buyout funds with vintages between 2005 and 2020, the difference between the IRRs of top- and bottom-quartile mega-funds was 8.3%, compared to 12.6% of middle-market buyout funds and 13.6% of PE growth vehicles, according to a PitchBook report from Q3 2025.
In response, LPs are doing one or two of three things: holding onto their existing top-performing relationships with an iron grip, discarding the underperformers or flocking to large, blue-chip managers, making it that bit harder for smaller, less established LPs to break in.
LPs fighting tooth and nail to write a check to a mega-fund or a manager with a household name may, however, want to take a closer look at the data.
A low dispersion rate means that while the worst buyout mega-funds don’t do that badly, the best do not perform as well, on average, as their top-quartile peers in other parts of the market.
On average, top-quartile mega-funds returned 17.2% across vintages from 2005 to 2020. Meanwhile, top middle-market buyout and growth funds returned 20.61% and 20.9%, respectively.
Of course, these decisions depend on individual allocators’ specific risk tolerances, but it’s worth taking a second look at the lesser-hyped funds on the market.
Learn about our editorial standards.
