Global private equity firm EQT distributed nearly €170 billion in cash to fund investors in the first half of the year, with CEO Per Franzen emphasizing cash returns over asset values or internal rates of return in the company's report. The shift reflects prolonged exit delays driven by high interest rates, declining enterprise valuations, and stagnant IPO markets, making actual cash distribution a more critical performance metric for limited partners than book-value gains. As of end-2025, US buyout funds aged 10 years or more held a record $348.5 billion in net asset value, the highest on record, according to global financial data platform Pitchbook.
Aging Funds Accumulate Record Unrealized Assets as Alpha Narrows
US buyout funds with vintages exceeding 10 years held $348.5 billion in remaining net asset value at end-2025, the highest level ever recorded, per Pitchbook data. Residual assets in funds aged seven years or more also climbed sharply in recent years as exit delays persisted. High interest rates and valuation gaps between sellers and buyers prevented timely asset sales, leaving aging funds with accumulated unrealized holdings.
The environment fueled growth in continuation funds, which transfer existing fund assets into new vehicles to extend holding periods. These structures offer legacy limited partners liquidity options while allowing general partners to defer exit timing. The trend underscores limited partners' heightened focus on cash recovery and distribution schedules.
Buyout fund returns averaged approximately 7% in 2025, significantly trailing the S&P 500's 18% and MSCI World's 22% returns, according to a McKinsey & Company report published in February. The underperformance persisted even when excluding large-cap stocks such as the Magnificent Seven. McKinsey noted that 54% of limited partners in its survey identified distributions to paid-in capital (DPI) as a core or most critical performance indicator. The firm stated that asset value appreciation remains important but is no longer the decisive factor, with limited partner priorities clearly shifting toward liquidity.
South Korea National Pension Service Shifts Evaluation Framework to Cash Returns
South Korea's National Pension Service, the country's largest limited partner, revised its general partner evaluation criteria to emphasize actual cash returns over internal rates of return. The pension fund adopted a Total Portfolio Approach (TPA) framework in 2025, assessing alternative investments including private equity against opportunity-cost benchmarks tied to traditional assets such as stocks and bonds. Under TPA, the fund evaluates whether a given asset class or strategy generates superior returns compared to hypothetical allocations to public equities or fixed income.
Shin Wang-geon, head of the governance center at Samil PwC, explained in a March report that the National Pension Service judges domestic private equity investments based on value-add relative to opportunity-cost benchmarks, evolving from simple asset allocation toward strategy selection and alpha-focused management. Shin stated that the pension fund is a returns-oriented organization where actual exit performance and realized DPI carry substantial weight in evaluations, not merely internal rates of return. He projected that returns-centered assessment of general partners will intensify going forward.
Shin identified recent trends in South Korea's private equity market including reduced leverage, declining valuation multiples, delayed exits, fewer IPO exits, and increased continuation fund activity over the past three years — conditions mirroring the global market environment.
FAQ
What did EQT distribute to fund investors in the first half of the year?
EQT distributed nearly €170 billion in cash to limited partners in the first half of the year, according to CEO Per Franzen's report.
How much net asset value remained in US buyout funds aged 10 years or more at end-2025?
US buyout funds with vintages exceeding 10 years held $348.5 billion in net asset value at end-2025, per Pitchbook data.
What evaluation framework did South Korea's National Pension Service adopt in 2025?
The National Pension Service adopted a Total Portfolio Approach (TPA) framework in 2025, assessing private equity against opportunity-cost benchmarks tied to traditional assets and emphasizing actual cash returns over internal rates of return.
