Private equity executives warn that most funds launched during the industry’s peak exuberance between 2019 and 2021 will fail to deliver promised returns. Between two-thirds and 90 per cent of these funds are expected to fall short of their original targets, according to five senior dealmakers and buyout fund investors. High prices paid during the Covid-19 boom, fueled by low interest rates and optimistic forecasts, have made achieving targeted internal rates of return (IRR) difficult.

James Brocklebank of Advent said very few funds from 2019 to 2021 will meet their IRR goals, with one executive predicting average IRRs of just 7 to 8 per cent—well below the typical high-teens target after fees. Bain & Company estimates buyout funds exited only $386bn in holdings in the first half of this year, down from the same period last year, marking the fourth consecutive year since 2022 with less than 15 per cent of net assets returned to investors, compared to a 25 per cent average in the prior decade. Scott Kleinman of Apollo Global Management noted that while companies bought between 2018 and 2022 were good assets purchased at too-high prices, earnings growth may allow reasonable exits over time, though IRRs will still fall short of expectations.