Private Markets 2026 Outlook: Improving Liquidity Amid Greater AI Adoption

Jeffrey Diehl Managing Partner & Head of Investments
Jeffrey Akers Partner & Head of Secondary Investments
David Brett Partner & Head of Co-Investments
Brijesh Jeevarathnam Partner & Global Head of Fund Investments
Robin Murray Partner & Head of Growth Equity Investments
Bill Sacher Partner & Head of Private Credit

Key Takeaways

Improving Liquidity Amid Greater AI Adoption

• In venture capital, the focus is shifting from building AI infrastructure to broader enterprise adoption. In buyouts, corporate carveouts and sponsor transactions account for a larger share of deal flow, which we expect to accelerate as financing conditions ease and valuation spreads narrow
• In growth equity, enterprises that move from experimentation to full-scale deployment of AI systems across departments, creating broad-based spend reallocation toward AI-native solutions, are more likely to be differentiated
• In secondaries, we believe volatility will continue to drive dealmaking, with opportunities in GP-led continuation vehicles and a re-emergent venture secondary segment
• In our view, co-investments have become an essential component of a well-functioning buyout ecosystem — a dynamic that shows no signs of slowing. On the sell side, GPs face increasing pressure from LPs to deliver distributions, which is driving more assets to market. On the buy side, sponsors are supported by near-record levels of dry powder and robust credit markets.
• We believe private credit’s core middle market remains resilient, offering stronger yields, enhanced creditor protections, conservative capital structures, and lower losses
   

Executive Summary

Improving Exit Options Augur Well for Dealmaking, Liquidity

2025 saw a re-awakening of the US public equity markets as an exit route, with a number of high-profile initial public offerings (IPO) of technology and artificial intelligence (AI) companies enjoying a surge in post-debut valuations. Figma, Klarna, Circle and CoreWeave were among significant public share sales in 2025.1

The third quarter of 2025 was the biggest for new issuance since 2021, according to Renaissance Capital’s IPO Tracker,2 which counted 60 IPOs during this period in the US, raising a combined $14.6 billion. Increased IPO activity encourages us that this important exit route will continue to thaw during 2026. In turn, a healthy IPO market often provides important competitive tension for acquisition activity as it is infinitely easier to purchase a significant interest in, or take control of, a private company rather than one that has become publicly traded. Favourable credit conditions should further enhance the prospects for dealmaking and liquidity.

Should the anticipated increase in market activity play out, we would expect it to stimulate fundraising for private equity managers. If distributions increase due to heightened dealmaking, general partners (GP) will return to market to raise additional capital, which should be supported by investors seeking to redeploy distributions into new vintages.

Our top concern is the potential for persistent inflation and elevated interest rates, which could have an adverse impact on access to capital for private equity-backed companies, especially ones that might be over-levered. Geopolitical instability and regulatory uncertainty in key markets could also weigh on investor sentiment and slow cross-border dealmaking.

We are also closely watching for indications of any pullback in corporate spending on information technology, as a lack of durability in enterprise IT budgets could dent strong demand for productivity-enhancing software, slowing adoption cycles. So far, we have seen material corporate spending on AI, much of it testing for return on investment (ROI) with clear pockets of proven ROI.

These risks reinforce the importance of investing behind resilient business models and founders who can execute with capital efficiency.
 

“A healthy IPO market often provides important competitive tension for acquisition activity as it is infinitely easier to purchase a significant interest in, or take control of, a private company rather than one that has become publicly traded.”

– Jeff Diehl, Managing Partner & Head of Investments

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Primary Investments

Primary Investments: Increasing Venture Liquidity, Buyout Activity

We expect 2026 to be defined by greater liquidity opportunities in venture capital and continued strength in buyout activity, as steady financing markets and improving exit dynamics create a more constructive backdrop for private investors.

In venture capital, the focus is shifting from building artificial intelligence (AI) infrastructure to broader enterprise adoption. As that transition unfolds, the commercial impact of AI remains in its early stages, and 2026 will be an important year for identifying durable business models from experimentation.

Capital continues to consolidate around the most experienced managers and a concentrated group of category-defining companies, reflecting a pronounced flight to quality that has made fundraising particularly challenging for emerging firms and non-AI-native businesses.

Lastly, liquidity has shown early signs of improvement through stronger mergers and acquisition (M&A) activity and a handful of well-received IPOs. This is an encouraging development for a market that needs clearer distribution visibility to sustain investment momentum.

In buyouts, we expect transaction activity to continue to accelerate as financing markets ease and valuation spreads narrow. Corporate carveouts and sponsor transactions are accounting for a larger share of deal flow, supported by ample private credit capacity and a re-engaged broadly syndicated loan market. Value creation remains anchored in operational improvements with increasing use of AI, and platform consolidation, favoring managers with hands-on ownership and sector specialization.

For primary fund investors, the opportunity lies in alignment with managers positioned to capture this next phase of market evolution, where performance will be driven less by multiple expansion and more by earnings growth, innovation, and disciplined execution.
 

“Liquidity has shown early signs of improvement through stronger mergers and acquisition activity and a handful of well-received IPOs. This is an encouraging development.”

– Brijesh Jeevarathnam, Partner & Global Head of Fund Investments

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Growth Equity

AI Set to Go From Experimentation to Adoption

We expect 2026 to be characterized by widespread adoption of AI. We expect growth to be dominated by companies that go beyond incremental features and embed AI into workflows to deliver measurable productivity gains and return on investment. Enterprises that move from experimentation to full-scale deployment of AI systems across departments, creating broad-based spend reallocation toward AI-native solutions, are more likely to be differentiated.

Companies are showing a preference for integrated solutions over point tools, a dynamic that could spark increased platform consolidation via M&A activity. For growth investors, this sets the stage for category leaders to pull away and establish durable moats.

AI will accelerate the pace of innovation, from product development to go-to-market strategies. In the near term, AI tools improve internal company operations by allowing leaner teams to achieve more with fewer resources. Long term, we see AI expanding markets by making previously uneconomical workflows addressable with software, ultimately creating new categories of high-growth companies.

This is not just a technology trend – it’s a structural shift that will impact how we evaluate opportunities, with an emphasis on durable differentiation in data, distribution, and product integration. For investors, AI is becoming a horizontal capability that will reshape every sector.

We expect the direct secondary market to continue to grow, especially the employee tender market, which will be a huge opportunity going forward. We are also watching the evolution of corporate venture arms, which are becoming increasingly strategic and active participants in growth-stage financings. Together, these trends point to a more dynamic deal environment, with capital flowing through a broader set of channels than in prior cycles. The common thread is that adaptability – for both investors and founders – will be essential to capture opportunities in this shifting landscape.

We expect a healthier environment for growth stage companies to raise later-stage capital and pursue IPOs during 2026, helped by a more predictable cost of capital, which will allow investors and founders alike to plan with greater confidence. The balance of growth and discipline should ultimately benefit high-quality, well-capitalized companies that are solving real enterprise needs.
 

“We expect a healthier environment for growth stage companies to raise later-stage capital and pursue IPOs during 2026, helped by a more predictable cost of capital.”

– Robin Murray, Partner & Head of Growth Equity Investments

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Secondary Investments

Four Themes Drive Opportunity

Secondary transaction volume rose 45% in 2024 from the prior year to a record $162 billion, according to Jefferies,3 and surged 51% to $103 billion in the first half of 2025.4 We expect this momentum to continue in 2026, as investors increasingly use the secondary market to rebalance portfolios and generate liquidity. We believe four key themes are driving attractive buying opportunities.

First, periodic episodes of volatility over the past three years have created a challenging investment environment, leading to a cohort of motivated sellers and hesitant buyers. For example, proposals to change universities’ tax treatment and place limitations on federal research grants prompted many endowments to seek buyers for portions of their private equity portfolios in 2025. We expect to see more sources of volatility-driven opportunity amid macro uncertainty, shifting government policy, and evolving investor demands during 2026.

Second, growth in GP-led transactions, particularly continuation vehicles (CVs), is expected to persist. Supporting this sentiment, we have seen numerous high-quality GPs that are more consistently offering CV opportunities.

Third, we see the strongest prospects for normalized liquidity over the next 12-24 months within small buyout and lower middle market funds. Top-quartile performance of these funds has consistently exceeded that of larger funds.5 In our experience, valuation gains upon company exits have been roughly twice as high in small buyout and lower middle market funds as in large funds.

Finally, over the past 12 months, venture secondaries have become a more attractive opportunity as valuations stabilize, liquidity needs create motivated sellers, and the IPO market reopens. We believe investment managers with deep GP partnerships, differentiated insights into portfolio company performance, and disciplined selection should be better-positioned to capitalize on this renewed opportunity.
 

“In our experience, valuation gains upon company exits have been roughly twice as high in small buyout and lower middle market funds as in large funds.”

– Jeff Akers, Partner & Head of Secondary Investments

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Co-Investments

Dry Powder, Liquidity Needs Mean Constructive Outlook

We believe the outlook for co-investments remains positive. Over the past two decades, the asset class has experienced sustained structural growth as GPs and LPs increasingly recognize the strategic and economic value that co-investments provide. In our view, co-investments have become an essential component of a well-functioning buyout ecosystem — a dynamic that shows no signs of slowing.

With the overall deal environment still subdued by historial standards, GPs continue to consistently turn to trusted co-investment partners who can move with speed, flexibility, and conviction to complete transactions, particularly in the small- to mid-sized segment of the market. At the same time, we have seen accelerating interest from a wide range of LPs seeking co-investment exposure, attracted by fee-efficient access to high-quality, diversified private equity portfolios.

We are optimistic that 2026 will mark the beginning of a market-wide renaissance in deal activity. On the sell side, after more than three years of subdued M&A activity and limited liquidity, GPs are facing increasing pressure from LPs to deliver distributions, which is driving more assets to market. Median holding periods for buyout portfolio companies exceeded six years in 2023 and 2024, longer than at any point in roughly two decades.6 On the buy side, sponsors are well positioned to capitalize on opportunities, supported by near-record levels of dry powder7 and robust credit markets. Together, these factors should help narrow what have recently been insurmountable bid-ask spreads, fostering renewed transaction momentum.

We expect this evolving market environment will create a compelling backdrop for co-investments. Rising deal activity should accelerate liquidity generation, while also expanding the pipeline for new investments.

We believe that constructing well-diversified portfolios across multiple dimensions — sector, geography, vintage, and GP relationship — is a key element for managers looking to position themselves to not only navigate periods of macro turbulence, but also to capitalize on significant growth opportunities, particularly in the small and mid-market segments.
 

“We have seen accelerating interest from a wide range of LPs seeking co-investment exposure, attracted by fee-efficient access to high-quality, diversified private equity portfolios.”

– David Brett, Partner & Head of Co-Investments

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Private Credit

Core-Mid Market Shows Resilience

We believe the outlook for private credit continues to remain largely favorable and is well suited for the current environment. Key industry dynamics that support the market include:

• Private credit all-in yields remain high and continue to compare favorably to most credit alternatives;
• Although the US Federal Reserve has begun to ease policy, we expect rate declines to be gradual, and for rates to remain elevated relative to post-global financial crisis standards;
• Following a broader slowdown in M&A activity during the first half of 2025 due to tariff-related uncertainty, there has been a notable increase in deal volume, which has helped to maintain competitive dynamics; Importantly, we believe the secular supply/demand imbalance favoring private credit investors remains intact;
• While public market sentiment and valuations are elevated, we believe there are material economic and geopolitical uncertainties in the market, which underscores the importance of proper manager selection; and
• The core middle market remains resilient, generally offering investors stronger yields, enhanced creditor protections, conservative capital structures, and lower losses. As such, we believe the core middle market remains an attractive sector within private credit, particularly against the backdrop of general global economic and geopolitical uncertainty.
   

“We believe the core middle market remains an attractive sector within private credit, particularly against the backdrop of general global economic and geopolitical uncertainty.”

– Bill Sacher, Partner & Global Head of Private Credit

Read More From Adams Street Partners

1. List of US IPOs in 2025, accessed October 3, 2025
2. Renaissance Capital 3Q 2025 US IPO Market Review, September 23, 2025
3. Jefferies, , Page 2, January 2025
4. Jefferies, H1 2025 Global Secondary Market Review, Page 2, July 2025
5. Information regarding the relative outperformance of the top quartile of small buyout and lower middle market funds as compared to larger funds is based on Burgiss data as of December 31, 2023. Numbers are subject to updates by Burgiss. Burgiss is a recognized source of private equity data, and the Burgiss Manager Universe includes funds representing the full range of private capital strategies; however, it may not include all private equity funds and may include some funds which have investment focuses that Adams Street Partners does not invest in. Data and calculations by Burgiss, sourced on October 24, 2024. The returns referenced herein do not necessarily represent the returns of Adams Street or any particular Adams Street Partners fund or investor.
6. Bain & Company Private Equity Outlook 2025: Is a Recovery Starting to Take Shape, Figure 17, March 3, 2025
7. Bain & Company Private Equity Outlook 2025: Is a Recovery Starting to Take Shape, Figure 9, March 3, 2025; S&P Global Market Intelligence Global private equity dry powder continues fall from 2023 peak, July 4, 2025

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