Across private equity, venture capital, real estate, and private credit, investment strategy has never been more complex—or more interconnected. Macroeconomic uncertainty, structural shifts in liquidity, and evolving limited-partner expectations are reshaping how managers think about risk, opportunity, and differentiation. In this environment, both general partners and limited partners are recalibrating their approaches to balance resilience with innovation.
Today’s market is defined by contradiction. High interest rates and tighter credit have slowed deal flow and exits, yet capital still seeks yield. Liquidity remains constrained, but new forms of capital—private credit, continuation funds, and co-investments—are filling the gaps once dominated by banks.
“We’ve had a cycle over the last two years with a very high-interest-rate environment, an uncertain regulatory climate, and tight liquidity.”
– Mehdi Khodadad, Global Co-Leader of Sidley Austin’s M&A and Private Equity Group
“That’s had incredible stress on valuations and the ability of sellers to deliver the returns they expected. But what it’s also done is accelerate innovation in how deals get done,” observed Khodadad.
That innovation is visible in hybrid structures and liability-management tools that help sponsors extend hold periods, provide liquidity, or recapitalize portfolio companies. Continuation vehicles—once niche—are now mainstream, allowing LPs to roll exposure into high-performing assets while giving managers more time to create value. At the same time, the rise of private credit has redrawn the capital-supply map, giving sponsors alternatives to traditional lenders and empowering GPs to be more opportunistic across the capital stack.
The LP Perspective: Scale, Fit, and Focus
For asset owners, the challenge is different but no less pressing: how to generate meaningful alpha at scale. Anton Orlich, Head of Private Equity at CalPERS, described the balancing act of running one of the world’s largest investment portfolios. “It’s extremely difficult to try to generate outperformance at that scale in public markets, even harder than it is in private markets,” he said. CalPERS has leaned further into private investments since 2022, broadening its historically large-buyout-heavy portfolio to include middle-market, growth, and venture strategies.
Orlich emphasized that manager selection—and portfolio fit—matter more than ever.
“It all starts with portfolio fit. A lot of ‘nos’ that managers hear during fundraising have nothing to do with their performance. It’s about whether they fit into a specific portfolio’s needs.”
– Anton Orlich, Head of Private Equity, CalPERS
“It all starts with portfolio fit. A lot of ‘nos’ that managers hear during fundraising have nothing to do with their performance. It’s about whether they fit into a specific portfolio’s needs.”
– Anton Orlich, Head of Private Equity, CalPERS
The best outcomes, he noted, come when managers identify where they genuinely add differentiated value and target LPs seeking that exposure. “Instead of a shotgun approach, invest time upfront in defining what makes you different and which LPs actually need that exposure. It’s harder work, but it’s far more efficient.”
To manage its scale while still engaging emerging managers, CalPERS has built a federated model with seven specialized teams, each responsible for sub-portfolios. This approach allows the institution to write smaller checks to niche managers while maintaining oversight and scalability. “We can’t get too small, but by partnering outside traditional fund structures—through co-investments, for example—we get access to the smaller end of the market and still make it meaningful,” Orlich said.
Private Credit’s Expanding Role
On the GP side, private-credit managers are capitalizing on structural shifts. Kenneth Saffold, Co-Founder and Managing Partner of o15 Capital Partners, described how his Atlanta-based firm bridges private credit and equity to deliver flexible capital solutions in health care, business services, and education. “We’re opportunistic in how we deploy,” he said. “Because we can move up and down the capital stack, we can be very strategic depending on the economic cycle.”
That mix allows the firm to balance downside protection with upside participation.
“From a risk-return perspective, private credit can complement private equity exposure in LP portfolios. Seventy percent of what we do is alongside other private-equity groups—supporting M&A transactions in the sectors where we have deep expertise.”
– Kenneth Saffold, Co-Founder and Managing Partner, o15 Capital Partners
Private credit’s growth also underscores a broader transformation in capital formation. As banks retreat from middle-market lending, direct-lending platforms are stepping in, often forming collaborative relationships with traditional lenders. “We call it ‘co-ompetition,’” Saffold said. “We work closely with banks through first-out, last-out structures that create better risk sharing. That collaboration gives borrowers flexibility and investors more stable returns.”
Real Estate Reimagined
The real-estate sector faces its own reckoning after years of disruption. For Robin Zeigler, Founder and CEO of MURAL Real Estate Partners, opportunity lies in addressing the persistent mismatch between supply and demand—particularly in what she calls “attainably priced housing.” Her firm develops mixed-use communities in under-invested markets, combining retail expertise with residential development to build what she describes as “ecosystems of everyday life.”
“Pre-pandemic, there was so much focus on Capital-A affordable housing and luxury market-rate housing. That created a massive gap in the middle—teachers, police officers, nurses, service workers. They don’t have housing that’s affordable in most major markets.”
– Robin Zeigler, Founder & CEO, MURAL Real Estate Partners
“Pre-pandemic, there was so much focus on Capital-A affordable housing and luxury market-rate housing. That created a massive gap in the middle—teachers, police officers, nurses, service workers. They don’t have housing that’s affordable in most major markets.”
– Robin Zeigler, Founder & CEO, MURAL Real Estate Partners
MURAL’s projects aim to close that gap by layering retail, residential, and public-private partnerships into each development. “We’re solving a public-health and economic challenge, and because we’re solving for that imbalance, alpha follows us,” she said. “Our conservative cap-rate assumptions consistently outperform because of the demand we’re meeting.”
Zeigler believes that co-investment partnerships between LPs and real-estate managers could help scale these solutions. “Many structured real-estate funds are siloed,” she noted. “There’s a tremendous opportunity for more strategic co-investments that address the seven-million-unit housing shortage in the middle.” By blending value-add and opportunistic projects within a single portfolio, she argues, managers can de-risk while still delivering attractive returns.
Despite headwinds, adversity often accelerates evolution. “The clients I work with who’ve been the most resilient are the ones who’ve had more failures than successes,” said Khodadad. “You don’t learn much when everything is a straight line. You learn in times like this—when the market tests your discipline and adaptability.” The past two years of high rates, tighter regulation, and compressed exit multiples have forced GPs to be more creative in managing duration and liquidity, and LPs to demand greater transparency on how those adjustments translate into returns.
That dynamic is also changing the GP-LP relationship. Co-investments, once valued primarily for fee discounts, are now central to portfolio design. “It’s more than a fee conversation,” Khodadad said. “It’s about risk management, scalability, and diversification.” For LPs like CalPERS, co-investments also help align incentives and give greater visibility into deal quality. “We try to concentrate on manager selection,” Orlich said. “If we can do that well, everything else follows.”
Thematic Tailwinds and New Frontiers
Beyond capital structure, secular themes are reshaping opportunity across asset classes. Khodadad pointed to technology and energy transition as defining drivers. “AI adoption, digital health, and sustainability are thematic forces every investor is contending with,” he said. “We’re seeing sponsors integrate these trends not only through portfolio companies but in how they run their own businesses.” Venture and growth managers are increasingly investing in data analytics, cybersecurity, and process automation to improve performance measurement and reporting—enhancements that LPs now view as hallmarks of institutional quality.
At the same time, smaller managers are gaining momentum as investors rediscover the performance advantages of specialization. “Small is big now,” Khodadad observed. Heightened regulatory scrutiny and slower capital formation at mega-funds have opened the door for agile, sector-focused GPs to outperform. For LPs, that creates both opportunity and complexity: access to differentiated alpha, but also the need for more sophisticated due diligence and monitoring.
Resilience, Patience, and Precision
If there is a unifying theme in today’s private markets, it is discipline—knowing when to lean in and when to hold back. “The best managers aren’t just successful when rates are low and times are good,” Zeigler said. “They’re creative when challenges come, and they know how to be nimble.” Orlich agreed that adversity often sharpens performance. “One reason diverse and emerging managers outperform,” he noted, “is because they’ve gone through more trials early on. It doesn’t feel great at the time, but it makes you better than you ever would have been.”
For Saffold, the lesson is persistence. “Before it starts with anything else, it starts with performance,” he said. “If we deliver results, everything else follows.” And for Khodadad, perspective matters most. “Be patient,” he advised. “These cycles come and go. Put your helmet on, stay focused on what you’re great at, and come out stronger on the other side.”
Ivelisse Rodriguez Simon, Managing Partner of Avante Capital Partners, offers a unifying perspective across asset classes: success in today’s market requires both collaboration and conviction. “We can’t rest on past performance—we’re only as good as our next deal,” she said. For Rodriguez Simon, winning in this environment comes down to preparation and partnership: identifying the right LPs for a firm’s strategy, staying disciplined amid rejection, and leveraging community to scale.
“Nobody walks alone in this business. The power of our networks—and our ability to learn from each other—is what keeps us growing.”
– Ivelisse Rodriguez Simon, Managing Partner, Avante Capital Partners
The forces shaping investment strategy today—macroeconomic volatility, rising LP expectations, and innovation in structure and theme—are deeply interconnected. As asset classes blur and market cycles compress, success will hinge on clarity of purpose: knowing one’s edge, aligning with the right partners, and executing with agility. The path forward may be uncertain, but for those willing to adapt, the opportunity remains vast.