"Turning Point for Private Equity This Year... Focus on Europe and Secondary Deals"

Fundraising Contracts as Liquidity Constraints Take Center Stage
Global LPs Turn Their Attention to the Secondary Market
Europe Chosen Over North America as the Most Attractive Region

Jeff D.L. Adams, Managing Partner and Head of Investments at Street Partners

There are forecasts that this year, the private equity investment market is on the verge of a massive realignment due to liquidity constraints. Analysts point out that Europe is emerging as the preferred investment region over North America, while the secondary market—where transactions between private equity funds (PEFs) take place—will attract greater attention.

Adams Street Partners (ASP), a global private equity investment management firm overseeing more than $65 billion (approximately 97 trillion won) in assets, released its 6th annual report, "The Great Realignment: Liquidity, Principles, and a More Selective Landscape," on March 18, 2026.

ASP diagnosed that while confidence in the private market remains robust, capital deployment is becoming more selective and stringent, and securing liquidity has emerged as an urgent priority. The key themes presented in the report are: ▲Confidence in private market recovery ▲Liquidity as a strategy ▲The rise of the European market ▲Preference for the middle market ▲The imperative of artificial intelligence (AI) ▲Stricter capital deployment ▲Activation of co-investments and the secondary market.

Jeff Deal, Managing Partner and Head of Investments at Adams Street Partners, explained, “The private market has moved beyond an era that relied on ample liquidity and multiple expansion. We are now in a challenging environment where superior management capabilities, sector expertise, and rigorous underwriting truly stand out.”

Fundraising Contracts... Global LPs Focus More on Performance Than Size

According to the report, liquidity constraints have emerged as a major topic in private market investing. Ninety percent of respondents predicted that liquidity pressures would influence their investment strategies this year. Among them, two-thirds expected that impact to be significant or moderate.

It was diagnosed that decreased liquidity has led to a contraction in fundraising. The proportion of limited partners (LPs) planning to increase commitments to existing managers dropped from 67% to 53%. The demand for adding new managers also hit its lowest level in five years.

As a result, LPs are increasingly channeling capital to managers with a proven ability to consistently generate excess returns (alpha) and demonstrated sector expertise. Governance has also been highlighted as a crucial factor, with 85% of LPs citing management incentive structures as a key driver of private market returns.

Additionally, 40% of LPs identified market volatility as their biggest investment challenge, followed by interest rates and inflation at 39%. In this environment, 72% of respondents predicted that middle market funds would outperform large and mega buyout funds. The report analyzed that this reflects investors' growing emphasis on value creation over size or leverage.

LPs Turn Their Gaze to the Secondary Market... Growing Interest in Co-Investments

As distributions fell below historical averages, LPs began turning to the secondary market—meaning transactions between private equity funds, such as Continuation Vehicles (CVs)—as a means of managing cash flow and rebalancing portfolios. CVs refer to a structure where, upon fund maturity, assets are not sold but instead transferred to a new fund managed by the same manager, allowing investment to continue. The report explained that the secondary market is being utilized as a strategic asset allocation tool to secure liquidity and identify attractive entry points, especially as exits have slowed.

The report also analyzed that the proportion of co-investments—where LPs invest directly alongside managers in high-quality assets—is increasing. Co-investments offer high transparency, fee efficiency, and sophisticated portfolio management. Through this approach, LPs are focusing less on expanding relationships with managers and more on building reliable partnerships.

Most Attractive Investment Region? Europe Surpasses North America

The report highlighted that, this year, LPs chose Europe—not North America—as the most attractive region for investment. Respondents paid particular attention to the appealing valuations, policy support, and abundant investment opportunities in the European middle market. While North America remains a core region for many portfolios, LPs are pushing for greater regional diversification out of concern for geopolitical tensions and concentration risks.

At the same time, geopolitical risk is rapidly emerging as a key strategic consideration. About 90% of respondents answered that geopolitical issues—including U.S.-China relations—would have a significant impact on private market strategies.

The report also emphasized that AI is no longer just an investment theme but a core element of management capabilities. The proportion of LPs identifying disruptive technological innovation as a major risk surged from 17% last year to 28% this year, suggesting that AI’s growing influence on valuations, competition, and business models is increasingly recognized.

Furthermore, the technology and healthcare sectors, as well as co-investments, each received support from 39% of respondents as the most promising investment areas this year.

Jeff Deal stated, “AI is no longer a ‘nice-to-have’ differentiator, but a value-creation engine. LPs now expect managers not only to invest in AI-driven companies, but to embed AI capabilities across the entire portfolio management process—from deal sourcing and due diligence to value creation.”

This content was produced with the assistance of AI translation services.