Private Equity Poised to Outperform Despite Market Turbulence

Editor
Apr 13
2 min read

What's New

According to KKR's April 2025 report "Staying on Course in Private Equity," private equity investments made during periods of high market volatility have historically generated the highest returns relative to calmer periods, with PE expected to be the best-performing asset class over the next five years despite current global market uncertainty.

Why It Matters

While global markets face volatility from geopolitical tensions and new tariffs, private equity's historically lower correlation to public markets offers investors potential shelter and opportunity, particularly for managers with scale, conviction, and operational expertise to execute in challenging environments.

Big Picture Drivers

Volatility creates unique buying opportunities including take-privates, carve-outs, and family business partnerships when public markets falter.
Experience matters significantly, with a 14% historical performance gap between top and bottom-performing PE managers.
Deployment strategy should remain steady through market cycles, as over-committing during boom times limits ability to capitalize during downturns.
Concentration in public markets has increased over the past decade, with returns increasingly driven by a handful of tech giants.
Flexibility for private companies to implement long-term strategies without quarterly earnings pressure enables greater value creation potential.

By The Numbers

14%: Historical gap between top and bottom-performing private equity managers
6.5%+: Expected annualized private equity returns over next five years (highest among asset classes)
$15 billion: Value of Gardner Denver after KKR's operational improvements and merger with Ingersoll Rand

Key Trends to Watch

Manager selection will become increasingly critical as volatility creates wider performance dispersion between experienced firms and less-resourced competitors.
Carve-out opportunities are emerging as larger businesses reassess their portfolios during economic uncertainty, exemplified by KKR's pending Karo Healthcare acquisition.
Linear deployment strategies that maintain consistent investment pacing regardless of market conditions will likely outperform market-timing approaches.
Operational value creation capabilities are differentiating top performers from those relying primarily on financial engineering or market tailwinds.

The Wrap

For investors seeking shelter from public market volatility, private equity offers compelling historical evidence of outperformance during turbulent periods, but manager selection is paramount—firms with proven value creation capabilities, patient capital deployment, and experience navigating complex market environments are best positioned to capitalize on current market dislocations.