A more accommodative interest rate environment and a booming global stock market are setting the stage for a stronger year ahead for private equity, with experts predicting renewed momentum into 2026 as investor capital increasingly flows into private markets, according to Nikkei Asia.
The global private market has expanded dramatically over the past decade, underscoring its rising importance in investment portfolios. Data from asset servicing firm Ocorian shows that the value of private assets held in funds has climbed about 10% this year to a record high of more than $14 trillion. Ocorian’s Global Assets Monitor forecasts that figure will approach $24 trillion within five years, with private equity nearly doubling to $17.4 trillion.
Private equity remains the largest segment within alternative assets, driven largely by institutional investors seeking long-term exposure to private companies rather than publicly listed stocks. While the sector enjoyed a standout year in 2021, deal activity later slumped as rising interest rates, inflation, geopolitical uncertainty, valuation mismatches, and delayed exits weighed heavily on transactions.
That downturn now appears to be easing. Nikkei Asia reports that deal value and volume are showing signs of recovery, including across Asia. John Kettnich, a partner at New York-based StepStone Group, said a widening gap between public and private market valuations suggests dealmaking could accelerate. Speaking at the SuperReturn private markets conference hosted by Informa Connect in Tokyo, Kettnich noted that more than half of private equity-backed companies have now been held for over five years, creating pressure for exits and acting as a catalyst for renewed deal activity.
Mingchen Xia, managing director and co-head of Asia investments at Hamilton Lane, said global investor portfolios have become heavily concentrated in the United States, particularly in technology stocks across both public and private markets. He explained that strength in public equities is likely to spill over into private markets, as increased IPO activity and buoyant stock prices improve exit opportunities for private equity funds.
Global equity markets in the U.S., Japan, Hong Kong, and India have been lifted by the artificial intelligence boom and a pickup in public listings. Xia said improved exits can enhance fund performance and stimulate fundraising, creating what he described as a chain reaction across the private markets ecosystem.
Another structural shift highlighted by Nikkei Asia is the rapid growth of evergreen private asset funds, which have no fixed end date and offer periodic liquidity under certain conditions. Asset manager Franklin Templeton said in a recent report that expanding advisor adoption and potential inclusion in retirement plans signal a long-term transformation in the wealth management channel that could extend well beyond 2026.
Lower interest rates are also improving conditions for dealmaking. With the U.S. Federal Reserve and other major central banks cutting rates, financing costs are easing. Kettnich said that even a clear downward trajectory in interest rates is enough to support a revival in private equity transactions.
Across Asia, deal volumes are rising, with Japan emerging as a standout market. Xia described Japan as the hottest private equity destination in the region in recent years, citing its strength as a traditional leveraged buyout market. Hamilton Lane, he said, favors smaller transactions with more attractive entry valuations rather than highly competitive mega-deals dominated by firms such as Blackstone and KKR.
Tokyo Stock Exchange-led reforms are adding to Japan’s appeal by pushing listed companies to improve capital efficiency and divest non-core assets. Xia said undervalued firms are also under pressure to go private, creating favorable conditions for buyout investors.
Institutional appetite for alternative assets continues to grow. Data from analytics firm Preqin shows allocations rising from 15.7% in 2020 to nearly 20% in 2024. A recent survey found that more than 80% of Japanese investors plan to maintain or increase exposure to private market assets, driven by the search for higher returns, steady income, and diversification.
Despite the optimism, challenges remain. Pamela Fung, managing director at Morgan Stanley Private Equity Solutions, cautioned that Asia’s private markets are shaped by diverse economic and regulatory environments. While the region has attracted global attention amid U.S. tariffs and geopolitical tensions, she said fundraising has yet to see a significant uplift.
Fung, also speaking at SuperReturn, said Asia’s complexity requires deep local knowledge and on-the-ground engagement. As a result, she argued that while interest in the region is high, many investors remain cautious. “In terms of fundraising and deal flow, we haven’t seen Asia pick up that significantly,” she said, adding that many investors appear to be observing opportunities rather than committing capital.
