Limited partners are scaling back their private equity commitments, with only 38 percent planning to increase allocations in 2026, down from 45 percent this year. The shift signals a notable change in investor sentiment toward the asset class, according to Private Equity International's latest LP Perspectives Study. This marks the first significant decline in planned investment growth in several years.

The findings, revealed in PEI's new podcast miniseries, highlight growing caution among institutional investors. Factors contributing to the shift include market volatility, rising interest rates, and concerns about valuation multiples in private markets. Some LPs are diversifying into other alternatives like private credit and infrastructure, seeking different risk-return profiles.

This cooling enthusiasm could impact fundraising for private equity firms, particularly those targeting mid-market and smaller deals. As competition for capital intensifies, managers may need to demonstrate stronger value creation strategies and operational improvements to attract commitments. The data suggests a more selective approach to private equity investing is emerging across the institutional investor community.