Why Private Equity’s Playbook Is Losing to Public Markets

Private equity funds that generated higher returns than public markets for decades have underperformed since 2019, according to Steven Kaplan, a professor at the University of Chicago Booth School of Business. Higher interest rates have reduced the profitability of debt-financed buyouts, while companies acquired at peak valuations in 2020 and 2021 have become harder to sell. PitchBook reported that private equity firms held more than 33,000 companies awaiting exit as of the article's publication. Investment firms are increasingly evaluated on their ability to improve business operations rather than on financial engineering through leverage and valuation multiple expansion.

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