Private markets continued to deliver insipid performance in the third quarter of 2025, with returns dwarfed by those seen in buoyant global equity markets, according to the latest data from PitchBook.
According to preliminary data published in its Global Fund Performance report, private equity showed an internal rate of return (IRR) of 1.2 per cent in Q3 of 2025, while the overall return for private debt stood at 1.9 per cent.
The data provider, now owned by Morningstar, says that across all private market sectors near-term IRRs lag their long-term averages, with rising interest rates weighing on asset valuations and leading to poor returns.
The report says: “Private equity performance remains subdued compared with historical double-digit returns, as macroeconomic volatility has presented substantial headwinds.”
In its analysis, PitchBook says these lower valuations may be more temporary and could suggest an “eventual reversion to the mean”. However, it adds this is by no means guaranteed. The data provider said its latest quarterly results, following a subdued couple of years for private markets, could be “indicative of a new regime of lower returns for private market strategies”.
This analysis comes as UK DC pensions schemes are looking to diversify default strategies into private markets, and also face new ‘performance tests’ through the government’s value for money framework.
Looking at individual sectors, PitchBook’s data shows that private equity continues to outperform much of the private capital universe over longer timescales. It adds that while distributions were “middling” through the first half of the year, deal and exit activity later in 2025 suggests an improved outlook for the strategy in the coming quarters.
Over the longer term the data shows that, across 10 years, the IRR for private equity was 14.3 per cent, and the IRR for overall private capital performance was 11.5 per cent.
The data also showed that recent returns for the real estate sector were also underwhelming, standing at 0.7 per cent for Q3 2025. However, venture capital performed more strongly, with returns of 3.6 per cent for the same time period. Private market fund-of-funds also delivered better performance in Q3 with IRRs of 3.1 per cent.
Overall the returns in private markets contrast sharply to those seen on publicly-listed market. In Q3 2025, the S&P 500 rose by 7.79 per cent, marking its best third quarter since 2020. This performance was in part driven by returning investor confidence after President Trump reversed many of the US trade tariffs first announced in April.
This also contrasts with the buoyant returns enjoyed by many DC pension schemes, who to date have little or no exposure to private markets. According to the capaDATA – an index of multi-employer UK DC workplace schemes – LifeSight master trust delivered returns for the year at 23.26 per cent, more than 8 percentage points above the average. The growth phase strategy of LifeSight was predominantly composed of overseas equities at 94 per cent, while other top-performing providers such as SEI, Fidelity, and Aon, also had default funds with a high allocation to overseas equities.
The CAPA average returns across asset classes over five years up to 31 December 2024 was 5.11 per cent, with an annualised return of 10.27 per cent for the five years to state pension age strategies.