This week, I attended a capital markets event at the London Stock Exchange to celebrate the 25th anniversary of Patria Private Equity Trust (PPET). For those less familiar with it, PPET aims to deliver long-term total returns by giving shareholders access to a diversified portfolio of private equity-backed companies, most of which are focused on Europe. It does this through a mix of primary and secondary private equity fund commitments, alongside direct co-investments.
The trust has been successful in achieving its aims over the long term. However, much has changed over the past quarter of a century and progress is rarely linear. Listed private equity is currently somewhat out of favour – something PPET and its peers have faced before – so the anniversary felt like a useful moment to revisit the case for private equity, the outlook for the asset class and what this might mean for PPET.
Private equity is a long-term asset class
Private equity is, by design, a long-term asset class. Managers are not buying shares that can be traded daily. They are taking ownership stakes in companies and working with management teams over several years to improve operations, grow revenues, make bolt-on acquisitions, professionalise systems and, ultimately, prepare the business for sale.
This takes time. The timing of exits is often dictated as much by market conditions as by company performance. When IPO markets are closed, debt is expensive or buyers are cautious, the best option may be to hold good businesses for longer rather than sell them at the wrong point in the cycle. That can make private equity frustrating during quieter realisation periods, but it is also central to how value is created. Patient ownership allows managers to compound growth within portfolio companies and realise that value when conditions are more favourable.
Patience required, but the returns justify it
While patience is required, the long-term returns from private equity have been strong. Data from Preqin, included in PPET’s presentation, showed private equity IRRs of 13.8%, 14.2% and 12.9% over five, 10 and 20 years respectively. This compares with 8.5%, 10.4% and 8.8% for the MSCI World Small Cap index, which is a sensible proxy for the mid-market segment on which PPET focuses. PPET’s own numbers also support the case. At the end of 2025, the trust had £1.3bn of net assets, a 25-year track record, a 3.0% dividend yield and a 14.1% annualised 10-year NAV total return. That is a solid foundation from which to face today’s more challenging backdrop.
Exits are harder at this point in the cycle
A key positive for private equity is that portfolio companies have not stopped growing. However, exits have become harder. This mirrors the experience of many small-cap managers, who have argued for some time that their portfolio companies continue to perform well operationally but are not being recognised by public markets. The post-Covid period has brought inflation, sharply higher interest rates, war in Ukraine, geopolitical instability, tariff uncertainty and now conflict involving Iran. This has created uncertainty and equity market volatility, neither of which helps when private equity managers are trying to sell businesses at attractive prices.
Realisations have slowed, but assets are not permanently impaired
Not surprisingly, realisation activity has slowed and pricing has softened. PPET’s presentation highlighted that the implied cash yield (the actual cash distributed to investors relative to the capital they originally invested) for global buyout funds averaged 26.5% between 2013 and 2021, but only 14.2% between 2022 and 2025. In other words, private equity funds have been distributing less cash back to investors. That has been a headwind for the whole listed private equity sector, particularly as investors have become more focused on balance sheets, commitments, discounts and the conversion of NAV into cash.
This is relevant to recent developments at HarbourVest Global Private Equity (HVPE), which is taking action to narrow its discount following pressure from activist investors. HVPE has a strong long-term record, but our concern is that a greater focus on managing the discount through buybacks and other forms of capital return could come at the expense of new investment. That may help narrow the discount today, but it risks weakening the foundations for future returns. In our view, long-term compounding is the primary reason to invest in private equity, and shareholders may come to regret giving that up for a few percentage points of discount narrowing.
However, it would be wrong to confuse a slower exit market with a permanently impaired asset class. In many cases, private equity managers are not forced sellers. If the market is not offering an attractive price, they can continue to hold, invest in and develop their companies. That may be frustrating for investors who want realisations today, but it could also lay the foundations for a stronger period of distributions when conditions improve.
PPET has plenty of assets in the exit zone
PPET has plenty of assets that could contribute to that recovery in realisations. Around 63% of its portfolio companies, including 22 direct investments, have been held for four years or more. This represents approximately £885m of portfolio value that is theoretically “ripe for exit”.
That does not automatically mean a wave of disposals is imminent, but it does suggest that PPET has a sizeable pool of mature investments that could be realised when market conditions improve.
Private equity has adapted to the shortage of IPOs
IPOs, traditionally an important exit route for private equity investments, have accounted for only a small proportion of exits in recent years. Instead, trade sales and secondary buyouts have done much of the heavy lifting.
This is understandable. Public equity investors have been more cautious, valuation expectations have changed and many good companies have little incentive to list into uncertain markets. In the meantime, secondary buyouts and GP-led transactions have become more important sources of liquidity.
This has raised eyebrows in some quarters, but it is not necessarily unhealthy. The growth in GP-led secondaries reflects the fact that managers may want to hold good assets for longer while giving existing investors a route to liquidity. These structures could be abused if poorly designed, but at their best they are a pragmatic response to a market where traditional exit routes are partly blocked. PPET’s continued ability to achieve uplifts on exit provides some reassurance. Its exposure to secondaries also gives it another way to benefit from liquidity pressures elsewhere in the system.
Average uplifts have declined, but PPET’s remain healthy
One recurring concern, albeit one we think is overstated, is that private equity valuations may be too stale or too optimistic, particularly when listed markets have derated. PPET’s presentation showed that exit premia have moderated, both for global buyout deals generally and for PPET’s own portfolio, but realised exits from PPET’s portfolio have still come through comfortably above carrying values.
For global buyout deals, the average exit uplift was 12% in 2021, 3% in 2022, 2% in 2023, 1% in 2024 and 2% in 2025. PPET’s corresponding uplifts were much stronger: 41% in 2021, 20% in 2022, 18% in 2023, 26% in 2024 and 12% in 2025.
We think this reflects the strength of PPET’s investment process and manager selection. More than 70% of its underlying primary funds fall within the top or second quartile by TVPI and IRR.
PPET’s strategy looks well suited to the current environment
PPET has long focused on the European mid-market: businesses with enterprise values of €100m to €1bn at entry. These are typically established, cash-generative companies with scope for operational improvement, professionalisation and growth.
Importantly, PPET’s investments are not reliant solely on leverage or multiple expansion. Its managers are focused on improving the underlying businesses, with around 70% of value creation in the portfolio driven by revenue and EBITDA growth.
Europe is not one market but many, with different languages, tax systems, legal regimes and business cultures. That complexity can deter outsiders, but it creates opportunities for local managers with deep networks. PPET’s focus on a relatively small group of core relationships is designed to capture that. The trust says 73% of portfolio value is held with 17 core managers.
This is where a listed fund-of-funds structure can earn its keep. Most private investors cannot access these managers directly. Even many institutions would struggle to build the breadth of relationships that PPET’s platform offers. Shareholders are paying for access, selection and portfolio construction. The key test is whether those things add value over time, and PPET’s long-term record suggests that they have.
The opportunity set is also changing. Companies are staying private for longer. Around 96% of global companies are privately held and the number of private equity-backed companies now dwarfs the number of listed companies. Public markets are therefore an increasingly incomplete representation of the corporate universe. Investors who restrict themselves to quoted equities are missing a large and growing part of the opportunity set.
The sector mix is important too. Like many private equity portfolios, PPET has meaningful exposure to technology, including software. That area has been under pressure as higher rates and AI disruption have changed the market’s view of some business models.
However, PPET is not overly reliant on a software recovery. Healthcare accounts for 22% of portfolio value, IT for 24%, industrials for 18%, with the balance spread across consumer, financials, materials, utilities and other areas. The managers also highlighted a broader rotation out of software and into industrials within private equity, which may create fresh opportunities for mid-market managers.
Scrutiny remains important
Listed private equity trusts have had to deal with scepticism over NAVs, unfunded commitments and liquidity. Some of that scepticism is healthy. Investors should ask hard questions about balance sheet strength, the pace of realisations and the quality of underlying managers.
However, PPET appears to be addressing the right areas: its portfolio is diversified across more than 650 underlying companies; it has a clear European mid-market bias; it combines primary funds, direct investments and secondaries; it has been moving towards more direct investments, which can improve fee efficiency and boost returns; and it also has a mature portfolio that should be capable of generating realisations once conditions become more supportive.
PPET’s 25th anniversary comes at an interesting moment
The outlook is not without risks. Realisations remain subdued, IPO markets are not yet functioning properly and this is not an easy time to sell private companies. However, selling good assets into weak markets is rarely the best way to maximise value. When exit conditions improve, PPET should be well placed to benefit. For now, the trust offers exposure to a part of the market that public equity investors cannot easily access, through a portfolio that has become more focused, more mid-market and more relationship-driven over time. The next phase of returns may depend less on valuation expansion and more on the patient harvesting of investments already made. That is not a bad position to be in.