Private Markets Returns Lag the Long Run — Except in Venture, Where the AI Trade Took Over

What's New

A familiar gap reopened in the latest performance data: across nearly every private strategy, one-year returns trailed 10-year results — with venture capital the standout exception. PitchBook's Q3 2025 Global Fund Performance Report (with preliminary Q4 2025 data) shows VC rebounding sharply as the public-market AI trade spilled into private valuations, driving a wide geographic gap in which North America outpaced a less AI-exposed Europe.

Why It Matters

Soft recent returns raise an uncomfortable question the report poses directly: is this a structural downshift as less-discerning retail capital floods in, or simply 2021 exuberance still unwinding? The answer shapes how LPs underwrite the asset class for the rest of the decade.

Big Picture Drivers

• AI animal spirits: The public AI rally lifted VC marks, but the report cautions that VC's improving exit value has come from a narrow set of deals.

• A looming PE markdown: PE growth funds' tech tilt boosted them through Q3, but a Q4 2025–Q1 2026 software sell-off on AI-disruption fears should weigh on PE marks as those quarters report.

• Real assets resilience: Over a three-year horizon, infrastructure — especially digital infrastructure — outperformed, supported by energy security, AI datacenters, and decarbonization.

• Real estate at the back: Rate sensitivity and post-pandemic office/warehouse repricing left real estate last across horizons.

By The Numbers

• Since 2007: PE leads cumulative returns across the PitchBook Private Capital Indexes, aided by pandemic-era stimulus.

• 3-year horizon: Real assets and infrastructure lead, a different picture than the long-run ranking.

• 1-year: VC is the only strategy whose returns topped its 10-year average.

• Q3 rate cuts: Pulled private-debt returns lower via floating-rate resets and wealth-channel outflow concerns.

Key Trends to Watch

• Barometer signal: PitchBook's Return Barometers point to VC moderating into Q1 2026 while natural resources moves sharply higher on Iran-war commodity disruption; PE, infrastructure, and private debt look stable.

• Secondaries scrutiny: Secondaries outperformed every horizon, but the practice of marking discounts up to NAV immediately after purchase is drawing questions.

• Evergreen tell: The Morningstar-PitchBook Evergreen Indexes — a timelier health gauge — show mixed results, with private debt moderating and real estate trailing.

The Wrap

The headline is a tale of two clocks: a long-term record that still favors private equity, and a near-term reality where only the AI-soaked corners of venture are outrunning history. With a software-driven PE markdown likely in upcoming prints, the next few quarters will test whether 2025's venture rebound was a turn or a head-fake.