The Evolution of Private Equity Strategies: IRR, Fundraising and the Human Capital Imperative

It has been a fascinating couple of years in private equity. Looking at IRRs by vintage, the market is becoming more unforgiving. Buyouts, long considered the backbone of the asset class, have shown far greater cyclicality. IRRs fell to 8.58% in 2021, remained muted at 9.39% in 2024, and the 2023 bounce to 16.00% proved short-lived (PitchBook). Growth equity, which appeared to be the star performer in 2023 with a staggering 26.52% IRR, fell sharply to –2.30% just one year later, a clear example of pricing risk catching up. Venture capital has been even more volatile, with IRRs dropping to 3.10% in 2021 before rocketing to 47.00% in 2024 for early-stage funds. The catch, however, is that this surge is almost entirely mark-to-market, not realised returns. 

By contrast, secondaries have continued to deliver. The 2022 vintage returned 27.92%, with follow-on years holding steady in the 18–24% range, explaining why institutional LPs have been directing increasing allocations toward this segment (PitchBook). Private debt remains consistently solid, with direct lending generating 10–11% IRRs and outperforming many equity strategies on a risk-adjusted basis. The return of covenants and greater sponsor discipline has been a contributing factor. In stark contrast, real assets and infrastructure have struggled, with infrastructure IRRs hitting –21.90% in 2024. 

While the data here is presented in IRR terms, still the dominant historical benchmark, there is a growing shift in LP sentiment toward DPI (Distributions to Paid-In Capital) as a more meaningful measure of performance. According to McKinsey’s 2025 Global Private Markets Report, 2.5 times as many LPs now rank DPI as a “most critical” metric compared with three years ago, as constrained exit conditions make liquidity more valuable than paper gains. 

Structural changes are also reshaping the market. GP stakes have gained traction, with dedicated funds investing directly in private equity managers themselves, sharing in performance fees while underpinning future fundraising. Established players such as Three Hills, Synova, and Hayfin have raised significant GP stake capital, with newer entrants like Armen joining the field. Continuation funds have also surged in popularity amid a sluggish exit market, rising LP demand for liquidity, and a secondaries market adapting to these needs. Preqin data shows that in 2024 a record 77 continuation funds raised $39 billion, with momentum carrying into 2025 as $25 billion was raised across 54 funds in the first half alone. Deals from Inflexion, Vista, and Tikehau underscore the strategy’s appeal, particularly as nearly 70% of LPs cite exit challenges as a key concern. 

Fundraising trends reflect a market that is smaller in number but larger in scale. Global capital raised peaked in 2021 and has declined each year since, with 2025 seeing the lowest fund count in a decade — fewer than 2,500 funds globally (PitchBook). Yet the average fund size is now approaching £500 million, with LPs concentrating commitments into fewer managers and writing larger cheques. McKinsey’s analysis shows fundraising fell 24% year-on-year in 2024 to $589 billion, marking the third consecutive annual decline, but capital is concentrating in secondaries, credit, and continuation vehicles. Real estate and real assets have experienced significant capital flight. Regionally, the US continues to dominate, Europe remains stable, and Asia, particularly China, has seen meaningful declines. 

These shifts have profound implications for human capital across private markets. For investment professionals, strategy matters more than ever and firms are prioritising specialists. Secondaries and structured capital teams are expanding, seeking individuals with strong modelling skills, continuation fund expertise, and GP stake experience. Private credit is growing beyond mega direct lending, with demand in special situations, asset-backed finance, and NAV lending. Growth and venture teams are more cautious, favouring professionals with experience navigating valuation compression or executing exits in challenging conditions. 

Investor relations and fundraising functions, once small and lean, are becoming central to a firm’s competitive edge. With LPs backing fewer managers, every raise counts. The most effective IR professionals are data-literate, adept at benchmarking, and able to clearly map a fund’s strategy to an LP’s portfolio needs. More firms are adopting semi-liquid or evergreen fund structures to access wealth markets, and many are dividing investor services and fundraising into distinct teams. The integration of AI into IR workflows, from investor database analysis to DDQ automation, is becoming a differentiator. Those who have successfully raised in the tough conditions of 2023 and 2024 are particularly in demand. 

Meanwhile, operating partners and value creation specialists are no longer considered a luxury hire. With exits delayed, value creation is often the only lever for returning capital, making these roles pivotal. The highest demand is for professionals who have scaled businesses in B2B services, tech infrastructure, healthcare, and consumer-adjacent sectors, especially those with bolt-on integration experience, digital pricing expertise, and the ability to lead transformations. Operating partners capable of managing cross-border teams and moving seamlessly between board-level influence and hands-on execution are especially sought after. 

The rules of the game have changed. The days when a generic “top quartile” claim could win investor support are over. Strategy, execution, and timing now determine who outperforms, and that applies to firms and individuals alike. For professionals in the market, whether seeking a move, building a team, or raising capital, success hinges on aligning skills with where capital is actually flowing. This is no longer about riding the cycle, it is about proving you can win in the market we are in, not the one we just left.