Private equity’s patience must create value

By the Editorial Team · Tuesday, September 29, 2026

Private equity investors are concerned as slower cash returns raise questions about value creation during prolonged holding periods. Experts stress that the industry's success depends on using extra time to improve assets rather than delaying exits or maintaining inflated valuations without a clear value-enhancement strategy.

Private equity investors are facing growing concerns as the pace of cash returns slows, prompting debate over the industry’s ability to create value amid extended holding periods. While some argue that the distribution drought is a real and pressing issue, others caution that focusing solely on return timing risks undermining a model inherently based on patient capital.

Steven Pauls, founder of Moonfare in Berlin, emphasizes that private equity’s value proposition depends on investors’ willingness to accept long-term, illiquid commitments. “The ability to wait is part of the model,” he said, noting that difficult exit markets should not pressure managers into selling assets prematurely. Forced sales at unattractive prices may increase short-term distributions but potentially damage long-term value creation.

The challenge, according to Pauls, lies in how fund managers utilize additional holding time. Some deploy extra time to improve earnings and strengthen businesses, while others may delay confronting overvalued assets acquired during peak market conditions in 2021. Aggregated distribution metrics, he cautions, fail to differentiate between these fundamentally different approaches.

Data from JPMorgan Asset Management highlight the wide disparity in private equity returns, with a 19.2 percentage point difference between upper- and lower-quartile managers—significantly larger than the 2.9 point spread seen among large-cap equity managers. This suggests that the industry’s recent lengthening of holding periods does not automatically signal a broken investment thesis.

Pauls contends that the private equity model only falters when extended holding periods serve as a pretext for carrying stale valuations or when “continuation vehicles” maintain ownership without a clear plan to generate value. He advises investors to evaluate not just the timing of cash distributions, but also whether extended investment horizons have translated into meaningful enhancements in asset quality and earnings.

As private equity funds navigate a challenging post-pandemic exit environment, these perspectives underscore the importance of assessing value creation beyond headline return figures. The industry’s promise remains intact if managers leverage patience to build stronger companies rather than merely postpone portfolio adjustments.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.