Private equity has been one of the outperforming asset classes of the last two decades, and for ten years running, many family offices treated the annual PE vintage as an automatic allocation. For the first time, two of the families Westwick works with have decided to hit pause on the 2026 vintage. Here is why.
The warning signs accumulated through 2025. Valuations of older vintages are increasingly supported by unsold assets, which casts a longer shadow over stated marks. Funds are falling behind their normal divestment schedules and carrying heavier unrealised backlogs. Continuation vehicles have proliferated, useful in some cases, but also a way to defer the reckoning. Liquidity events keep being pushed out.
At the same time, the economics for an LP have tightened. The 2-and-20 fee load, the drag of higher interest rates on over-leveraged portfolio companies, and the fee layers attached to every PE-related transaction (bankers, lawyers, advisers) have cumulatively widened the performance hurdle the asset class has to clear for a family to still come out ahead.
None of this means PE is broken, and none of the families we advise have left the asset class permanently. What it means is that, for long-horizon owners with the option of investing directly in private companies or of running a disciplined public-equity portfolio, the case for an automatic PE allocation has to be made again, rather than assumed. That is a healthy conversation, and it is overdue.
If you want to dig deeper, Michael Cembalest's review of alternative investments is worth the time.
Frequently asked questions
Should family offices pause private equity investments?
Private equity has been a reliable return driver for family offices over two decades, but the conditions that made it exceptional (falling rates, expanding multiples, easy leverage) have changed materially. Families that continue to commit to PE on the same terms as five years ago are underwriting a different risk profile than they realise. A pause is not a rejection of the asset class; it is the right response to a market that has not yet repriced to reflect new conditions.
What is the right allocation to private equity for a family office?
The right PE allocation for a family office depends on the family's liquidity needs, time horizon, and ability to manage illiquidity in a stress scenario. Families with long horizons and modest current spending needs can tolerate more illiquidity than families with near-term distributions or uncertain spending patterns. The error most family offices make is setting PE allocation on the basis of expected return without modelling the liquidity impact of a sustained market dislocation.