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Fund Performance

Private equity returns show signs of life

PE fund returns are trending positive and showing signs of a slight recovery after poor performance in 2022.

Private equity fund returns in H1 2023 trended positive in contrast with the nosedive in VC performance.

After a period in the red last year, PE funds saw their highest quarterly returns since Q4 2021 in Q1 2023, according to PitchBook’s latest Global Fund Performance Report.

The upward mobility—while muted compared to pre-2022 returns—continued into the second quarter. PitchBook analysts estimate that Q2 2023 will generate overall PE fund returns of 2.7%, a figure they interpret as positive but too modest to signal the beginnings of a wider market recovery.


PE funds’ longer-term return projections also recovered slightly in the first part of 2023. After a negative Q2 2022, the one-year horizon IRR for PE funds reverted to a positive 1% in Q1 2023.

PE’s positive start to the year has also widened its performance gap with other private market asset classes, namely VC. The asset class—plagued with a severe downturn in valuations and stagnant exit activity—generated a one-year horizon IRR of -14.5%.

“Other asset classes such as VC have struggled to generate strong returns in recent quarters, which has pulled down long-term return profiles,” said Nalin Patel, PitchBook’s lead private capital analyst for Europe, the Middle East and Africa.

But PE is not out of the woods yet. The exit environment remains constrained, leaving fund managers with extended hold periods and weighing down overall fund performance.

In addition to dampened performance, the exit backlog has stifled PE fundraising activity. The total amount raised by closed PE funds through the end of Q2 2023 was down 12.9% from 2022, according to PitchBook’s Q3 2023 US PE Breakdown.

In Q2 2023, PE fundraising across the seven-largest US-listed alternative managers—Blackstone, KKR, Apollo Global Management, The Carlyle Group, Ares Management, TPG and Blue Owl—was down 57.4%, according to PitchBook’s Q2 2023 US Public PE and GP Deal Roundup.

This week, The Carlyle Group reported its Q3 fundraising activity fell short of the firm’s target, recording $6.3 billion across all strategies.

Still, despite short-term volatility, PitchBook analysts found that PE funds have displayed resilience across longer market cycles compared to other private market asset classes. According to the analysis, PE’s three-, five-, and 10-year horizon IRRs come in above overall private capital returns.

“PE is a long-term play and investors target returns over multiyear horizons,” Patel said.

Longer-term return horizons generally provide a smoother return profile across asset classes, Patel said.

Featured image by © Marco Bottigelli/Getty Images

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