The private equity industry is experiencing a fundamental shift as distributed to paid-in capital (DPI) becomes the primary metric driving fundraising in 2026. While traditional performance measures like IRR remain important, investors increasingly demand tangible cash returns before committing to new funds. This trend reflects the prolonged liquidity squeeze that has left limited partners cash-strapped and more selective about where they allocate capital.

Recent data from McKinsey & Company and Bain & Company reveals the depth of the DPI challenge. Five-year rolling DPI as a share of assets under management for buyout funds hit record lows in 2025, with distributions falling to just 6 percent of AUM in the first half of the year. This represents a significant decline from the 10-year average of 14 percent. The situation has created a stark divide between firms with strong DPI track records and those struggling to generate distributions from unrealized investments.

This bifurcation is reshaping the fundraising market, with firms demonstrating solid DPI performance gaining a clear advantage. CPP Investments and Hamilton Lane executives note that GPs who can show both strong returns and consistent distributions will raise capital more quickly, while others face increasingly difficult fundraising environments. The industry's ability to generate sustained exit momentum throughout 2026 will determine whether this trend continues or reverses.