Private equity has been in a bind. Managers have traditionally relied on public markets being “open” for initial public offerings (IPOs) in order to sell portfolio companies and return, or reinvest, capital for investors.
Between 2022 and 2024, however, the average number of companies listing annually on US markets fell to around 185 – almost 40% below the previous 10-year run rate.
That slowdown caused the private equity flywheel to stutter. There are now signs that the frost is thawing. The 2025 total is on track to surpass 350 listings, a marked improvement on recent years, even if many of the higher-profile IPOs are concentrated in fintech and crypto.
With markets warming once again to IPOs, it is timely to reassess the benefits of private equity investing and the current attractiveness of the asset class.
Higher for longer
Investors have long been sceptical of private equity. Yet returns from the three largest private equity investment trusts available to UK investors have comfortably outperformed the FTSE All-Share over the past decade.
Source: Lipper for Investment Management, Total Return, Share Price, GBP, 30/11/2025
While lower interest rates and multiple expansion clearly provided a tailwind to private equity returns throughout the 2010s, a less appreciated driver has been the improvement in the operational performance of portfolio companies.
In a “higher for longer” interest rate environment, revenue and earnings growth are likely to play a much larger role in determining returns. In our view, this favours managers able to provide genuine resources and support to portfolio companies – a “buy, build and grow” approach rather than “buy, sweat and strip”.
Founded in 2015 as a not-for-profit organisation, OpenAI has recently been valued at close to $500bn
Despite tighter financial conditions, take-private deals are now returning. The recent $55bn acquisition announcement of video game company Electronic Arts marked the largest buyout in history, with around $20bn supported by debt.
Not only does this underline the continued role private equity can play in markets, but – speaking as an avid FIFA gamer – I can only hope these transactions continue to improve the user experience too.
Private for longer
Much attention has been paid to the “Magnificent Seven” – the group of US mega-cap technology stocks that have driven much of the S&P 500’s recent performance. Yet despite their impressive public market returns, private technology businesses continue to scale at an extraordinary pace.
Take OpenAI, a leading player in the artificial intelligence boom. Founded in 2015 as a not-for-profit organisation, it has recently been valued at close to $500bn, just months before its tenth birthday. That makes it the fastest company in history to reach a half-trillion-dollar valuation – and it has all happened in the private markets.
Adam Norris: Is the tide turning for emerging markets?
If listed at that level, OpenAI would already rank among the top 20 constituents of the S&P 500 and be worth more than double AstraZeneca, the largest company in the FTSE 100.
This value creation should not be overlooked. In the past, such growth tended to occur largely within public markets, with companies starting life as small or mid-caps before graduating upwards. NVIDIA, now valued at around $4.4trn, came to market in 1999 with a valuation of just $300m.
As private markets capture more of this growth for longer, it is little surprise that global small-cap indices have struggled to keep pace with their larger peers.
Sometimes the answer is right in front of you
Much has been made of the development of Long-Term Asset Funds (LTAFs) as a way for sophisticated investors to access private assets. While we welcome innovation that meets client needs, we already regularly assess the opportunities available to the mass market.
With private equity managers now once again able to head for the exit, we believe value is emerging
The listed private equity investment trust sector is home to a wide range of top-tier managers with strong long-term track records, as highlighted earlier. Today, we see multi-year wide discounts across the sector, with the average trust trading at a 23% discount to net asset value – effectively buying £1 of assets for 77p.
With private equity managers now once again able to head for the exit, we believe value is emerging.
Within the CT Global Managed Portfolio Trust Growth portfolio, around 20% is currently allocated to listed private equity trusts. Our largest single holding is Oakley Capital Investments, which focuses on partnering with European entrepreneurs across technology, consumer, business services and education.
The trust has a strong long-term record and earlier this year announced a partial exit from a portfolio company at a 300% premium to carrying value. That result underlines an important point: high-quality, in-demand assets can still attract competitive pricing, regardless of the broader exit environment.
Adam Norris is investment manager at Columbia Threadneedle Investments
Leave a comment