At Cambridge Associates, we’ve witnessed this evolution firsthand. We’re excited to share a few key insights from our own playbook to help you navigate this dynamic environment.

1.   Access + Selection + Execution = Success

We believe success in co-investing relies equally on access to the best deals, rigorous deal selection, and effective execution. Weakness in any area can undermine portfolio outcomes. Luckily today there are multiple ways for investors to add co-investment exposure, including building a direct program, investing in a co-investment fund, or creating a bespoke single client vehicle (typically for larger investors). Adopting the optimal implementation strategy—which may involve combining more than just one of these approaches—is crucial to achieving strength across all three pillars.

Always ask: Is my co-investment program strong across these three pillars? If not, how can I improve my implementation methodology to address any gaps?

2.   Don’t Let Fee Savings Cloud Your Judgment

Co-investments often feature zero management fee and carried interest, making them attractive from a cost perspective. However, fee savings alone shouldn’t drive your decision. As a co-investor, you should have access to detailed underwriting information. Take advantage of this (plus other data sources available to you) to fully evaluate the company alongside the sponsor’s value creation plan, considering historical growth rates and margins, competitive positioning, customer concentration, sector trends, valuation, leverage, exit options and other critical factors that will actually drive returns (or mitigate downside risk).

Always ask: Do the company’s fundamentals support our expected future return, regardless of the fee savings?

3.   Diversification Means More Than A Handful

We believe effective risk management in co-investing requires maintaining proper diversification, which we target at 15-18 active deals (built over three years for new portfolios). Why 15-18? Our experience has shown that this threshold tends to position portfolios well to help capture the outsized winners that have driven returns, while providing a buffer against potential losses, enabling investors to benefit from strong direct exposure with manageable downside. Whether you decide to invest directly or through a co-investment vehicle, you are making a conscience decision to invest in individual deals, partner with a co-investment partner, or construct a portfolio programmatically.

Always ask: Do I have all the essential ingredients (access, selection, and execution) in place to reach optimal diversification?

Co-investments can offer a powerful way to enhance returns, lower costs, and gain targeted exposures for all types of investors. We believe success requires access to robust deal flow, sharp opportunity assessment, and effective execution.

For more insights, listen to the full co-investment episode on our podcast, Cambridge Conversations.

If you’re interested in learning more about co-investing or want to discuss how to build the right portfolio for your needs, contact us to start the conversation.

The post A Look Inside Our Co-Investment Playbook: Top 3 Takeaways appeared first on Cambridge Associates.

Not long after the Federal Reserve began increasing interest rates in March 2022, ChatGPT was publicly launched and became the fastest-growing consumer application in history. Alongside rising interest rates, beginning in late 2022, software revenue growth rates and valuations quickly receded, creating long-term challenges for general partners who overinvested based on growth and valuation assumptions that turned out to be short-lived. By December 2022, median valuations for publicly traded software companies—which are used in valuing private software companies—had tumbled from a pandemic high of 19.0x revenue to 5.6x revenue.

More recently, median software revenue multiples have further compressed to 3.4x, reflecting investor concern that AI is going to eat software. Advancements in AI and their impact on the thousands of privately held software companies and valuations will not be as universal or immediate as what we have seen recently in the public markets. Some business models are immediately vulnerable, while others may exhibit more resilience due to having well-established moats across a range of attributes, such as solutions leveraging longstanding proprietary data or deeply embedded in customer workflows. AI represents both a risk and an opportunity in the private markets; thoughtful management of existing exposure and careful allocation toward this development could be long-term value drivers for today’s private investment portfolios.

Most private investment portfolios have long had material exposure to technology, and not just through their venture capital allocations. Technology, and really enterprise software, has held the top spot in private equity for more than ten years with a commanding lead. From a private markets perspective, current investment outcomes for this sector may ultimately sort themselves into two cohorts: pre-mid-2022 investments and post-mid-2022 investments. The first cohort is arguably most at risk, deployed at entry values, growth rates, and leverage assumptions reflecting a bygone era; it is not surprising that returns have come down and distributions have slowed for these vintages overall. While the second cohort was deployed in an environment that had begun to reset, it still must grapple with the implications of AI for its business models and investment success.

Managers and management teams have been assessing AI’s risk to business models while also integrating AI as a means to enhance, expand, or protect those models. At present, private equity managers are busy communicating with investors about their firms’ AI capabilities and portfolio company initiatives because sustained operating performance proof is yet to come. It will take varying amounts of time for these ongoing efforts to show up in the financials, which will ultimately determine investment value. In the meantime, we expect to see a slowdown in overall enterprise software transaction activity as managers and companies re-tool for this paradigm shift, alongside an increase in investment activity involving AI-native companies, either as platforms or as add-ons.

The paradigm shift isn’t down, it’s forward. AI will further expand the technology sector and will drive more investment; it already has, having largely taken over venture capital activity. Appreciating that it is a tumultuous period for enterprise software, technology as a whole is not going to stop being a dominant sector for investment. In fact, it’s likely to continue to expand. Limited partners are actively monitoring existing software investment developments in their portfolios for indications of progress or regress, which in turn will inform portfolio management decisions and also forward investment. In addition, as managers adjust to current developments, forward investing activity should reflect and express their views on how to earn their target return in this new paradigm. As performance unfolds, there will be a separation between those who find their way successfully through this market and those who do not; investor capital will move accordingly.

The post Has Private Equity Hit Peak Software? appeared first on Cambridge Associates.

First half 2025 highlights

• The US PE index has had mixed results against public markets over the last five years, generally outperforming small-cap and equaling or underperforming large-cap indexes. In periods ten years and longer, PE’s outperformance is more consistent. Amid a historically strong market for large, public tech companies, the US VC benchmark has only consistently outperformed small-cap stocks, while struggling to keep up with the large-cap S&P 500® and tech-heavy Nasdaq indexes.
• By market value, public companies accounted for a larger percentage of the VC index (about 7%) than the PE index (about 4%), as of June 30, 2025. Non-US companies represented almost a quarter of PE and a little less than 15% of VC.

US private equity performance insights

Vintage years

As of June 2025, eight vintage years (2016–23) were meaningfully sized—representing at least 5% of the benchmark’s net asset value—and, combined, accounted for 85% of the index. Six-month returns among the key vintages ranged from 0.6% for vintage year 2016 to 6.9% for vintage year 2023 (Figure 2).

Double-digit returns from communication services investments and mid-single-digit returns from healthcare, industrials, and IT were the biggest return drivers of for the 2023 vintage, while slightly negative returns in its two largest sectors, industrials and IT, dampened performance for the 2016 funds. The fund’s age or vintage year is one consideration when comparing returns across vintages as time is a component of the internal rate of return (IRR) calculation used for PE investments. In the current environment, hold periods have been extended, which will impact IRRs but not necessarily other return metrics, such as multiples of invested capital.

During the first two quarters of 2025, fund managers distributed more capital than they called—$78.9 billion and $67.6 billion, respectively. If this pace holds for the remainder of the year, 2025 will be a slower year than 2024 for both calls and distributions.

Five vintages (2021–25) accounted for almost all the capital called during the first six months. Two of those vintages, 2022 and 2023, were responsible for more than half the calls ($37 billion), which reflects both where they are in their investment periods and the size of those vintages in relation to the 2024 and 2025 cohorts. As is often the case, distributions were much less concentrated than contributions, and in this period, every vintage from 2012 to 2021 accounted for at least 5% of the distributions. The five most active vintages on the distribution front were 2016, and 2018–21, a potentially hopeful sign for limited partners (LPs) feeling a liquidity crunch.

Sectors

Figure 3 shows the Global Industry Classification Standard (GICS®) sector comparison by market value of the PE index and a public market counterpart, the Russell 2000® Index. The breakdown provides context when comparing the performance of the two indexes. The PE index has a significant overweight to IT and communication services as well as a meaningful underweight in “real assets,” including energy, real estate, and utilities (reflected in the “Other” category), while the public market has consistently been overweight to financials.

As of June 2025, at about 36% of the index’s market value, IT continued to be the largest among the six meaningfully sized sectors. Combined, the next four sectors by size—industrials, healthcare, consumer discretionary, and financials—accounted for almost 50% of the index’s value. Among the key sectors, first half returns ranged from 2.5% for consumer discretionary to 7.2% for financials. Healthcare and industrials both returned about 5%.

Three sectors garnered 70% of the capital invested by US PE managers in the first half of 2025: IT (36%), healthcare (18%) and industrials (16%). Over the long term, managers have allocated 53% of their capital to those three sectors. The biggest driver of the difference was the percentage of capital allocated to IT (historically 24%). In 2025, communication services and financials companies attracted more investment than consumer discretionary businesses, in contrast with the long-term trend.

US venture capital performance insights

Vintage years

As of June 2025, eight vintage years (2015–22) were meaningfully sized and, combined, accounted for 72% of the index’s net asset value. Performance for the key vintages during the first half of the year was mixed, ranging from -2.5% (2015) to 8.6% (2022) (Figure 4). Since its stretch of seven consecutive down quarters from January 2022 to September 2023, the VC index has now posted positive returns in all but one quarter.

The best-performing and least mature key vintage (2022) benefited from gains across sectors, with its largest exposures (IT and healthcare), posting double-digit gains. Results for the worst-performing and oldest key vintage (2015) were the opposite, with negative returns for the same two largest sector exposures, IT and healthcare.

In first half 2025, VC managers called more capital than they distributed ($26.9 billion and $16.1 billion, respectively), and if the pace were to hold for the remainder of the year, 2025 will be a more active year than 2024. Since the beginning of 2022, US VC managers have called 1.6x more capital than they have distributed. In the ten years prior (2012–21), the relationship was flipped, and they distributed 1.3x what they called.

Five vintages (2021–25) accounted for nearly all the capital called during the first six months. Three of those vintages (2022–24) were responsible for almost 70% of the calls ($18 billion). Like PE, distributions were much less concentrated than contributions, and in this period, all vintages from 2012 to 2020 accounted for at least 5% of the distributions. While the 2014 funds distributed the most ($2.7 billion), there were six others that returned more than $1.3 billion to LPs.

Sectors

Figure 5 shows the GICS® sector breakdown of the VC index by market value and a public market counterpart, the Nasdaq Composite Index. The breakdown provides context when comparing the performance of the two indexes. The chart highlights the VC index’s substantially higher exposures to healthcare, industrials, and financials and its lower weightings in communication services and consumer discretionary. The Nasdaq index currently has a higher tilt in IT, largely a product of an extended bull run in public tech companies.

As a group, the four meaningfully sized sectors made up 87% of the VC index, and returns ranged from 0.2% for healthcare to 29.7% for financials. The IT sector’s return was “middle of the pack,” while results for industrials were strong.

During the first six months, VC managers in the index allocated 85% of their invested capital to IT (48%), healthcare (26%), and industrials (11%). Over the long term, those sectors have garnered less than 80% of the capital, with the difference driven by the larger-than-normal allocations to IT and industrials, and lower-than-normal investment in healthcare in 2025. ■

Figure notes

US private equity and venture capital index returns

Private indexes are pooled horizon internal rates of return, net of fees, expenses, and carried interest. Returns are annualized, with the exception of returns less than one year, which are cumulative. Because the US private equity and venture capital indexes are capitalization weighted, the largest vintage years mainly drive the indexes’ performance.

Public index returns are shown as both time-weighted returns (average annual compound returns) and dollar-weighted returns (mPME). The CA Modified Public Market Equivalent replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME net asset value is a function of mPME cash flows and public index returns.

Vintage year returns

Vintage year fund-level returns are net of fees, expenses, and carried interest.

Sector returns

Industry-specific gross company-level returns are before fees, expenses, and carried interest.

GICS® sector comparisons

The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property and a service mark of MSCI Inc. and S&P Global Market Intelligence LLC and is licensed for use by Cambridge Associates LLC.

About the Cambridge Associates LLC indexes

Cambridge Associates derives its US private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of June 30, 2025, the database included 1,700 US buyout and growth equity funds formed from 1983 to 2025, with a value of $1.6 trillion. Ten years ago, as of June 30, 2015, the index included 990 funds whose value was $523 billion.

Cambridge Associates derives its US venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of June 30, 2025, the database included 2,699 US venture capital funds formed from 1981 to 2025, with a value of $591 billion. Ten years ago, as of June 30, 2015, the index included 1,593 funds whose value was $188 billion.

The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

About the public indexes

The Nasdaq Composite Index is a broad-based index that measures all securities (more than 3,000) listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated under a market capitalization–weighted methodology. The Russell 2000® Index includes the smallest 2,000 companies of the Russell 3000® Index (which is composed of the largest 3,000 companies by market capitalization). The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the US economy. Stocks in the index are chosen for market size, liquidity, and industry group representation.

The post US PE/VC Benchmark Commentary: First Half 2025 appeared first on Cambridge Associates.

by Andrea Auerbach

While the last year has been one of recovery for the private markets, the aftershocks of the 2021 era continue to reverberate, with both the distribution drought and concomitant fundraising slowdown expected to extend their four-year runs into 2026. We believe the private markets have now troughed and the recovery phase is underway amid an evolving market structure that demands fresh thinking from institutional investors and sophisticated families.

Let’s start with the secondary market, which we believe will continue to develop in 2026. Why? Because in this extended distribution drought, investors from all sides have been taking liquidity matters into their own hands. Many limited partners (LPs) have entered the secondary market as first-time sellers and general partners (GPs) have expanded the use of continuation vehicles (CVs). In fact, CVs are estimated to represent at least 20% of distributions in 2026 as LPs overwhelmingly opt for the “sell” option rather than roll. Manufacturing liquidity is one reason secondaries transaction activity has hit an all-time high in 2025, and we expect this trend to continue into 2026. Secondaries activity makes up less than 5% of all private market activity, which leaves a lot of room for expansion. With a pattern of earlier distributions and an early return bump, secondaries are likely to become a base layer in private market portfolios to offset unexpected primary fund investment return (and cash flow) volatility like we have recently experienced.

Individual investor capital will continue to replace or augment institutional capital in 2026. The institutional fundraising drought, which troughed in 2025 at a mere one-third of 2021 volumes, may have even been an unwitting accelerant in efforts to open the private markets to individual investors through varying outlets—including fund investment platforms, evergreen funds, interval funds, and defined contribution or similar program inclusion—as managers seek to diversify away from institutional sources of capital. The emerging individual investor class is participating through vehicles that imperfectly overlap with institutional investor structures yet invest in the same securities. Investment outcomes and implications will continue to reveal themselves in the coming year, and institutional investors and sophisticated families could benefit from positioning exposures to benefit from this surge or, at the very least, be somewhat insulated based on where capital is being collected.

The rise of the individual investor is accelerating the market bifurcation we first observed in 2019. Mega-managers, namely those who have expanded, acquired, or partnered to offer a range of private market investment options, are best positioned to capture the flag in the race for retail capital. These mega-managers, many of which are publicly traded, may indeed amass the lion’s share of aggregate investor capital, and, as a consequence, their role in a private investment portfolio will likely morph into something different as they manage multiples more capital than the rest of the market; institutional investors and sophisticated families will need to rethink the megas’ role in portfolios.

By our estimate, the institutional private market is only in its fifth decade, and many of the changes and shifts echo the evolution of other investment markets, with much of the morphing happening in the upper elevations as fund sizes continue to climb. The key in 2026 is to begin to adapt to these changes in market structure. Actively consider the use of secondaries in a portfolio, determine how to invest advantageously around or into the individual investor wave, and tier private market exposure to capitalize on both return and diversification, given the concentration of returns in other markets.

Investors should moderate commitments to seed-focused venture capital strategies in 2026

by Zach Gaucher

Early-stage–oriented venture capital programs have historically delivered the asset class’s best risk-adjusted returns, and we expect that to continue. However, for most investors in 2026, we advocate for limiting new commitments to exceptional pre-seed and seed-stage–focused strategies, given the maturation of the seed asset class, heightened early-stage valuations, and the elevated bar to go public.

As has been clear for some time, venture is no longer a cottage industry. More than 4,200 venture funds have been raised in the United States since 2022, many of which are pre-seed and seed-stage funds with less than $100 million of committed capital, according to Pitchbook. Even as mega funds—those larger than $1.0 billion—make up 40% to 60% of the total commitments raised over the same time period according to Cambridge Associates, there continues to be a proliferation of smaller seed funds.

The growth of seed funds has helped to support a thriving ecosystem resulting in more than 5,000 seed stage rounds each year since 2022. ¹ However, this activity—combined with larger, multi-stage firms moving into the ecosystem—has pressured valuations. While valuations are heightened across stages, seed valuations did not reset following the activity in 2020 and 2021 and have marched steadily upward.

The “private for longer” dynamic compounds the challenges facing current seed-stage investors. As average hold periods extend, and the bar to go public or achieve significant M&A becomes more elevated, winners may become rarer and more consequential for the asset class. Of note, in the 21 recent venture-backed technology IPOs we track, these companies had median last 12-month (LTM) revenue of $537 million, LTM revenue growth of 31.4% and scored 32.6% on the Rule of 40. ² Of course, we would be remiss to ignore that the majority of realizations for the asset class have been driven by M&A, but a healthy IPO market is the barometer by which the asset class is often judged.

For a seed manager investing in ten to 20 companies per year, allocating to a company that will reach today’s IPO scale reflects an out of the money option, given the more than 5,000 inception stage rounds that have occurred annually in recent vintages. Even getting to Series A remains an uncertain endeavor—just 15.5% of seed companies funded in first quarter 2023 had raised a Series A as of first quarter 2025.

The industry’s Power Law dynamic, which denotes that a small percentage of outcomes carry the industry’s returns, continues to play out in real time. Indeed, according to Cambridge Associates data, nearly 90% of the asset class’s value has been driven by the top 10% of companies. With these odds, allocators should be judicious in manager selection—pre-revenue, AI-focused seed funds may capture the zeitgeist but may not capture the Power Law. Allocators should commit to only exceptional seed managers and recognize that many new funds have similar profiles, with GPs often having strong operating or founding experience or spinning out of established firms resulting in a highly competitive, if somewhat undifferentiated dynamic.

LPs should be mindful that “missing” the Power Law winners can result in a venture program that underperforms expectations. While we are cautious on seed funds today, they have a role in venture programs. In other words, investors would be best served by thoughtfully committing to funds across the spectrum of stages, particularly when exceptional opportunities exist. Doing that will increase the odds that LPs can capture Power Law winners that slip through the grasp of earlier-stage managers.

Footnotes

1. According to third quarter 2025 Pitchbook data, an average 5,997 seed and pre-seed deals were completed each year between 2022 and 2024.
2. The Rule of 40 is defined as the LTM revenue growth rate plus the LTM EBITDA margin.

The post 2026 Outlook: Private Equity & Venture Capital Views appeared first on Cambridge Associates.

Of the $12.2 trillion currently held in Defined Contribution plans, $8.7 trillion is invested in 401(k) plans, a figure poised to grow because of the recent introduction of regulations requiring automatic enrollment alongside a $500 increase in the maximum annual contribution limit. If current 401(k) participants were to allocate just 10% to private investment offerings, nearly $900 billion of fresh capital would be heading for the private markets. This capital would be on top of the surging activity in evergreen and semi-liquid funds, which have been busy accumulating individual investor assets in their own right. By some accounts, the evergreen and semi-liquid markets have already attracted several hundred billion dollars in assets and are also expected to grow at strong clips. A recent survey indicated more than half of all private capital flows are projected to come from individual investors within two years.

By comparison, the institutional private equity and venture capital market has been in a slump, driven by a prolonged distribution drought that has trapped capital, much of which was invested at excessive valuations in 2021–22 that has yet to be productively harvested. This lack of distributions, coupled with short-term underperformance against public markets, has translated into several years of reduced commitments to the private asset classes. With institutional investors essentially on the sidelines, individual investors are an attractive source of capital for managers able to access them through the 401(k) market.

Target date funds (TDFs)—a growing subset of 401(k) strategies that adjust asset allocations as plan participants approach an expected year of retirement—could serve as the best place for private markets capital, given their long time horizons. General partners (GPs) offering private markets exposure to 401(k) participants will face challenges, including providing TDF managers the ability to rebalance, redeem, and access daily valuation information on private investments, which is not easy due to the highly illiquid nature and reporting constructs of private markets. Although their professional management and pooled nature can allow for more effective implementation, TDFs are still subject to all the liquidity and valuation requirements of a broader 401(k) offering. GPs will also have the challenge of delivering historical private investment returns in a structure that could impede the very elements that helped to generate those returns, including the requirement to invest immediately, which can impact entry valuation discipline and therefore returns.

What’s an institutional investor to do? We advocate “following the money,” by observing where it is accumulating because that will be where the pricing and return pressure will be most intense and investing in tiers of the market that stand to benefit from this burgeoning supply. Thankfully, with thousands of GPs in which to invest, the opportunity set for institutional investors extends far beyond those GPs in hot pursuit of the individual investor. Many investors can pursue compelling private investments at any tier of the private economy across a wide range of strategies and styles. Additionally, the current fundraising lull will likely result in less intense competition for portfolio companies that are beyond the reach of private investment funds servicing 401(k) funds over the next few years, potentially creating better opportunities and, therefore, stronger returns for intrepid institutional investors.

Footnotes

1. According to third quarter 2025 Pitchbook data, an average 5,997 seed and pre-seed deals were completed each year between 2022 and 2024.
2. The Rule of 40 is defined as the LTM revenue growth rate plus the LTM EBITDA margin.

The post Executive Order Opens the Gates to Private Markets appeared first on Cambridge Associates.

Calendar Year 2024 Highlights

• Returns for the US private equity (PE) index exceeded those of the S&P 500 for periods longer than three years as of December 31, 2024, and outpaced the small-cap index, the Russell 2000®, in all but two time periods analyzed (Figure 1). The US venture capital (VC) benchmark’s performance relative to public indexes has been less consistent, particularly against the tech-heavy Nasdaq.
• At the end of 2024, public companies accounted for a higher percentage of the market value of the VC index than of the PE one (roughly 7% and 5%, respectively). Both exposures represented declines from the prior few years. At the same time, non-US companies represented a bit more than 20% of PE and about 15% of VC.

US Private Equity Performance Insights

In many ways, 2024 was a continuation of 2023, with heightened geopolitical tensions, persistent valuation gaps between buyers and sellers, and a concentrated public market that created challenges for PE fundraising, investment activity, and exits. Growth equity performed better in 2024 than it did in 2023, and it outpaced buyouts. Limited partner (LP) cash flows rebounded somewhat in 2024, but the distribution yield remained shy of historical averages. At year end, nearly half of the index’s net asset value (NAV) resided in three vintages (2019–21), reflecting the outsized fundraising in those years.

According to Pitchbook, seven US PE-backed companies went public in 2024 and they were valued at $25 billion; the number of IPOs was the same as in 2023 and the overall value was up about $6 billion. IPO exits for US PE-backed companies have slowly picked up since nearly coming to a stop in 2022. Among the seven, three were IT or healthcare businesses, two were industrials companies, and there was one each in energy and education. The largest PE-backed IPO was StandardAero Aviation. The number of PE-backed merger & acquisition (M&A) transactions (742) trailed the total completed in 2023, the third consecutive drop in M&A exits. A quarter of the deals (184) had publicly disclosed valuations and based on the data available, the average transaction size among those deals was $1 billion, again less than the 2023 average. The second and fourth quarters in 2024 were slower by M&A number than the first and third, but average values were highest in the second and lowest in the fourth.

Vintage Years

As of December 2024, seven vintage years (2016–22) were meaningfully sized—representing at least 5% of the benchmark’s NAV—and, combined, accounted for 81% of the index’s value. Calendar year returns among the key vintages ranged from 3.2% for 2016 to 16.8% for 2022. The two largest vintages (2019 and 2021) returned 7.5% and 9.6%, respectively (Figure 2).

Part of the variability of returns across the vintage years was due to the performance of the individual strategies within the PE universe—buyouts and growth equity. For example, in the lowest-performing key vintage (2016), the bulk of the capital was raised by buyout funds and those managers earned only 1.2% in 2024, while growth equity returned 11.7%. For the best-performing large vintage (2022), the assets are more tilted to growth equity and both strategies earned strong returns.

From a sector perspective, in both the best- and worst-performing vintages, industrials and IT were the dominant sectors by size (accounting for about 60% of the market value at the end of the year) but the two sectors had different results. As in 2023, industrials were the main driver of the strong returns posted by the top-performing vintage (2022), while losses in this sector dampened results overall in the lowest-returning vintage (2016).

LP Cash Flows

In 2024, LP distributions ($174 billion) outpaced contributions ($143 billion), a reversal from the prior two years. Distributions rose 37% from 2023 and represented the second highest annual total ever, while capital calls decreased for the third straight year, reflecting the industry’s slower investment pace since 2021 (Figure 3). Despite the increase in capital distributed to LPs, the distribution yield—calculated by dividing the distributions by the NAV—remained low for the third consecutive year.

Four vintage years (2021–24) represented 84% ($121 billion) of the capital calls, with each drawing down at least $17 billion during the year; the 2022 vintage called $41 billion, the most of the four. Eight vintages (2014–21) accounted for 83% of the distributions, with amounts ranging from roughly $10 billion (2020 vintage) to nearly $30 billion (2019 vintage).

Sectors

Figure 4 shows the Global Industry Classification Standard (GICS®) sector breakdown by market value of the PE index and a public market counterpart, the Russell 2000® Index. The comparison provides context when comparing the performance of the two indexes. The PE index continued to have a significant overweight to IT and meaningful underweights to financials, energy, and real estate (the latter two are reflected in the “other” category).

As of December 2024, there were six key sectors by size and combined they represented 90% of the index’s market value; IT was by far the largest (36% of the index’s market value). Two of the six large sectors earned double-digit returns for the year (financials and industrials) and among all six, calendar year returns ranged from 4.9% for healthcare to 12.1% for financials.

Three sectors garnered about two-thirds of the capital invested by US PE managers in 2024—IT (31%), industrials (19%), and healthcare (17%). Over the long term, managers have allocated about 53% of their capital to those sectors. The biggest driver of the difference is the percentage of capital allocated to IT, which historically was about 23% of invested capital. Additionally, since inception of the index, consumer discretionary, communications services, and financials all garnered at least 10% of the capital invested by managers. During 2024, the three combined accounted for only 21% of activity.

US Venture Capital Performance Insights

The Cambridge Associates US VC index rebounded in 2024 following two years of negative returns in 2022 and 2023, but to some extent the industry continued to endure a challenging fundraising, investing, and exit environment. Younger vintages outperformed older ones and performance for the largest sectors (IT and healthcare) trailed that of smaller ones.

According to the National Venture Capital Association and Pitchbook, by number, US VC managers completed slightly fewer deals in 2024 than they did in 2023 (14,612 from 14,851), but when measured by value, 2024’s deals were meaningfully higher ($213 billion compared to $163 billion in 2023). Like investments, exits by number in 2024 were similar to those in 2023 (1,186 versus 1,155), but larger by value ($158 billion from $116 billion). Lost in the similarities by total number are the differences within exit types. For example, the number of public listings fell 26% (65 from 88), while the number of M&A and buyouts increased slightly. Values for M&A and public listings were both meaningfully higher in 2024 (44% higher), while the value of buyout exits was only marginally higher than in the previous year.

Vintage Years

As of December 2024, nine vintage years (2014–22) were meaningfully sized and, combined, accounted for 80% of the index’s NAV. Returns across the nine vintages ranged from 0.7% (2018) to 25.3% (2022), a wide dispersion that in part was related to when funds were raised. Those raised prior to 2020 fared much worse than those raised afterwards (Figure 5). For all but one of the large vintages (2017), performance during the second half of the year was better than that of the first half.

For the best-performing vintage (2022), all key sectors earned double-digit returns, and in the worst-performing vintage (2018), all key sectors posted negative or low single-digit results.

LP Cash Flows

US VC LP cash flows were more robust in 2024 than 2023, with capital call and distribution totals increasing by roughly 40% each. Managers called $46 billion from LPs—the second highest for any year on record—and returned $27 billion (Figure 6). Over the last three years (2022–24), managers have called 1.5x as much capital as they have distributed, reflecting the period’s lower-than-average distribution yield (distributions/NAV) for the asset class.

While four vintages (2021–24) accounted for 87% (roughly $40 billion) of the total capital called during the year, 12 vintages (2011–22) made up the same proportion of distributions. Each of the four vintages driving contributions called at least $8 billion. Among the widespread drivers of distributions, each of the 12 vintages returned between $1 billion and $3 billion, with the 2018 cohort at the high end of the range.

Sectors

Figure 7 shows the GICS® sector breakdown of the VC index by market value and a public market counterpart, the Nasdaq Composite Index. The breakdown provides context when comparing the performance of the two indexes. The chart highlights the VC index’s meaningfully higher exposures to healthcare, financials, and industrials. Both indexes are heavily tilted toward IT, and Nasdaq weightings in communication services and consumer discretionary have remained much higher than those of the VC index.

Collectively, the five meaningfully sized sectors made up 91% of the VC index. Performance among the five ranged from 2.1% for communication services to 38.8% for industrials. During the year, VC managers in the index allocated almost 80% of their invested capital to two sectors, IT (47%) and healthcare (32%). Only two other sectors, financials (5%) and industrials (6%), garnered even 5% of capital during the year. Over the long term, two key sectors—IT and healthcare—have attracted more than 70% of managers’ capital, and 2024 totals for financials and industrials were on par with long-term norms.

Figure Notes

US Private Equity and Venture Capital Index Returns
Private indexes are pooled horizon internal rates of return, net of fees, expenses, and carried interest. Returns are annualized, with the exception of returns less than one year, which are cumulative. Because the US private equity and venture capital indexes are capitalization weighted, the largest vintage years mainly drive the indexes’ performance.

Public index returns are shown as both time-weighted returns (average annual compound returns) and dollar-weighted returns (mPME). The CA Modified Public Market Equivalent replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME net asset value is a function of mPME cash flows and public index returns.

Vintage Year Returns
Vintage year fund-level returns are net of fees, expenses, and carried interest.

Sector Returns
Industry-specific gross company-level returns are before fees, expenses, and carried interest.

GICS® Sector Comparisons
The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property and a service mark of MSCI Inc. and S&P Global Market Intelligence LLC and is licensed for use by Cambridge Associates LLC.

About the Cambridge Associates LLC Indexes
Cambridge Associates derives its US private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of December 31, 2024, the database included 1,661 US buyout and growth equity funds formed from 1983 to 2024, with a total value of $1.6 trillion. Ten years earlier, as of December 31, 2014, the index included 958 funds whose total value was $515 billion.

Cambridge Associates derives its US venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of December 31, 2024, the database comprised 2,625 US venture capital funds formed from 1981 to 2024, with a value of $536 billion. Ten years prior, as of December 31, 2014, the index included 1,547 funds whose value was $173 billion.

The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

About the Public Indexes
The Nasdaq Composite Index is a broad-based index that measures all securities (more than 3,000) listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated under a market capitalization–weighted methodology. The Russell 2000® Index includes the smallest 2,000 companies of the Russell 3000® Index (which is composed of the largest 3,000 companies by market capitalization). The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the US economy. Stocks in the index are chosen for market size, liquidity, and industry group representation.

Footnotes

1. According to third quarter 2025 Pitchbook data, an average 5,997 seed and pre-seed deals were completed each year between 2022 and 2024.
2. The Rule of 40 is defined as the LTM revenue growth rate plus the LTM EBITDA margin.
3. Cambridge Associates’ mPME calculation is a private-to-public comparison that seeks to replicate private investment performance under public market conditions.

The post US PE/VC Benchmark Commentary: Calendar Year 2024 appeared first on Cambridge Associates.

While we wait for the geopolitical and macroeconomic dust to settle, it is likely that private market transaction activity will slow down. Unfortunately, the anticipated slowdown could not be happening at a more inopportune time, as the ongoing distribution drought and short-term return underperformance have already been weighing on the private markets, dampening activity and sentiment, including fundraising. This pause is going to amplify all of these elements.

Compared to the public markets, private markets deliver far more comprehensive exposure to the economy, from start-up companies to established companies large enough to go public that have opted to stay private, and everything in between, across all sectors. It is possible that the impact of tariffs and other government actions, including second order effects, may be felt further and more deeply in the private markets due to this depth and breadth.

A market slowdown also means the managers waiting to deploy nearly $2 trillion of dry powder have time to absorb the changes and incorporate adjustments ahead of expected deployment. Given the risks outlined above to the capital “in the ground” (i.e., already invested), private investment managers are hyperaware of the need to generate competitive returns on their next set of investments. First and second order effects, as they take hold, could also create additional investment opportunities. Private strategies potentially positioned to benefit during this period include secondaries, deep value industrial, and distressed, among others.

We advocate maintaining private market allocations. Investors should assess their exposures by manager, strategy, company stage, sector, and geography, and prepare to make adjustments to benefit their portfolios. Dry powder may vary by investor, but that capital—at a minimum—will go to work in the market ahead, capturing whatever benefits the current situation may yield. On top of that, we recommend maintaining investment pacing and, therefore, exposure going forward. From a market-wide cash flow perspective, we have observed that capital calls tend to outpace distributions when activity in general contracts to one degree or another. Investors should monitor their private market portfolio liquidity requirements. Maintaining a long-term perspective, which is required for private investing, should serve as a focal point during this tumultuous period.

Footnotes

1. According to third quarter 2025 Pitchbook data, an average 5,997 seed and pre-seed deals were completed each year between 2022 and 2024.
2. The Rule of 40 is defined as the LTM revenue growth rate plus the LTM EBITDA margin.
3. Cambridge Associates’ mPME calculation is a private-to-public comparison that seeks to replicate private investment performance under public market conditions.

The post Private Markets Bracing for Tariff Impacts appeared first on Cambridge Associates.

First Half 2024 Highlights

• Both private asset classes have struggled to keep up with the public indexes over the past three years as large-cap information technology (IT) companies have dominated the market. Over longer time periods, PE/VC indexes have performed well vis-à-vis public peers.
• By market value, public companies accounted for similar percentages of the VC and PE indexes (about 7% and 6%, respectively), as of June 30, 2024. Non-US companies represented a bit more than 20% of PE and a little less than 15% of VC.

US Private Equity Performance Insights

Vintage Years

As of June 2024, eight vintage years (2015–22) were meaningfully sized—representing at least 5% of the benchmark’s value—and, combined, accounted for 86% of the index’s value. Six-month returns among the key vintages ranged from 1.3% for vintage year 2016 to 7.5% for vintage year 2022 (Figure 2).

Investments in industrials were far and away the largest contributor to the strong performance for the 2022 vintage, while returns across the largest sectors for the 2016 funds were muted—slightly positive for IT and slightly negative for industrials.

LP Cash Flow

During the first two quarters of 2024, fund managers distributed and called roughly equal amounts of capital, $67.4 billion and $66.6 billion, respectively. If this cash flow pattern holds for all of 2024, the year would be markedly different than 2022 and 2023, a two-year stretch when managers called nearly $64 billion more than they distributed.

Four vintage years (2021–24) in the prime of their investment periods represented 83% ($55 billion) of the capital calls, with the three more mature vintages (2021–23) drawing down at least $14.8 billion in first half 2024. Five vintage years (2015–19) distributed 65% ($44 billion) of all capital returned to limited partners (LPs), led by the 2017 vintage’s nearly $12 billion total. There were seven other vintages that distributed at least $1 billion, going back as far as the 2009 cohort.

Sectors

Figure 3 shows the Global Industry Classification Standard (GICS®) sector comparison by market value of the PE index and a public market counterpart, the Russell 2000® Index. The breakdown provides context when comparing the performance of the two indexes. The PE index has a significant overweight to IT and communication services as well as a meaningful underweight in “real assets,” including energy, real estate, and utilities (reflected in the “Other” category), while the public market has long been overweighted to financials.

As of June 2024, at roughly 37% of the index’s value, IT remained the largest among the six meaningfully sized sectors. Combined, the next three sectors by size—industrials, healthcare, and consumer discretionary—accounted for another 39% of the index’s value. Among the key sectors, first half returns were lowest and mostly negative for healthcare, while all others posted low to mid-single-digit results.

US Venture Capital Performance Insights

Vintage Years

As of June 2024, nine vintage years (2014–22) were meaningfully sized and combined, accounting for 81% of the index’s value. Performance for the key vintages during the first half of the year was mixed, ranging from -1.4% (2015 and 2016) to 9.1% (2022) (Figure 4). While the VC index was up slightly for the full six months, it was down in the second quarter, marking the eighth negative quarter since the beginning of 2022.

For the youngest and best-performing large-sized vintage (2022), write-ups were widespread but most impactful in the vintage’s two largest sectors: IT and healthcare. In the two lowest-performing vintages, 2015 and 2016, write-downs were most pronounced in IT, but the 2015 group also suffered losses in communication services. Write-ups in healthcare in both vintages—and financials for 2016 funds—helped to offset some of the write-downs.

LP Cash Flows

In first half 2024, VC managers called $20.4 billion from and returned $11.4 billion to LPs, which represented a slight uptick in cash flow activity over the prior year. US VC managers have called more capital than they have distributed in nine of the ten previous quarters (covering the time period of January 2022 to June 2024), at a ratio of calls to distributions of 1.4x.

Three vintages (2021–23) accounted for nearly 80% (almost $16 billion) of the total capital called during the first six months. While each called more than $4 billion, the 2022 group called the most, $7 billion. Distributions were much less concentrated than contributions, with every vintage from 2011 to 2022 accounting for at least 5% of the distributions during the six-month period. Three vintage years, 2015 and 2017–18 distributed more than $1 billion each, representing about one-third of all capital returned to LPs.

Sectors

Figure 5 shows the GICS® sector breakdown of the VC index by market value and a public market counterpart, the Nasdaq Composite Index. The breakdown provides context when comparing the performance of the two indexes. The chart highlights the VC index’s substantial relative overweight in healthcare and notable higher exposures to financials and industrials. The VC index’s exposure to IT was historically higher than that of the Nasdaq, but starting in 2023, that dynamic shifted in conjunction with tech’s strong performance in the public markets coupled with modest returns in the sector in VC. Exposures to communication services and consumer discretionary companies are also much higher in the Nasdaq than in the VC index.

As a group, the five meaningfully sized sectors made up 91% of the VC index. Communications services earned the lowest return and industrials and more so financials had strong performance.

Figure Notes

US Private Equity and Venture Capital Index Returns

Private indexes are pooled horizon internal rates of return, net of fees, expenses, and carried interest. Returns are annualized, with the exception of returns less than one year, which are cumulative. Because the US private equity and venture capital indexes are capitalization weighted, the largest vintage years mainly drive the indexes’ performance.

Public index returns are shown as both time-weighted returns (average annual compound returns) and dollar-weighted returns (mPME). The CA Modified Public Market Equivalent replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME net asset value is a function of mPME cash flows and public index returns.

Vintage Year Returns

Vintage year fund-level returns are net of fees, expenses, and carried interest.

Sector Returns

Industry-specific gross company-level returns are before fees, expenses, and carried interest.

GICS® Sector Comparisons

The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property and a service mark of MSCI Inc. and S&P Global Market Intelligence LLC and is licensed for use by Cambridge Associates LLC.

About the Cambridge Associates LLC Indexes

Cambridge Associates derives its US private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of June 30, 2024, the database included 1,607 US buyout and growth equity funds formed from 1983 to 2024, with a value of $1.4 trillion. Ten years ago, as of June 30, 2014, the index included 937 funds whose value was $478 billion.

Cambridge Associates derives its US venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of June 30, 2024, the database comprised 2,537 US venture capital funds formed from 1981 to 2024, with a value of $417 billion. Ten years ago, as of June 30, 2014, the index included 1,500 funds whose value was $138 billion.

The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

About the Public Indexes

The Nasdaq Composite Index is a broad-based index that measures all securities (more than 3,000) listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated under a market capitalization–weighted methodology. The Russell 2000® Index includes the smallest 2,000 companies of the Russell 3000® Index (which is composed of the largest 3,000 companies by market capitalization). The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the US economy. Stocks in the index are chosen for market size, liquidity, and industry group representation.

Footnotes

1. According to third quarter 2025 Pitchbook data, an average 5,997 seed and pre-seed deals were completed each year between 2022 and 2024.
2. The Rule of 40 is defined as the LTM revenue growth rate plus the LTM EBITDA margin.
3. Cambridge Associates’ mPME calculation is a private-to-public comparison that seeks to replicate private investment performance under public market conditions.

The post US PE/VC Benchmark Commentary: First Half 2024 appeared first on Cambridge Associates.