To the casual observer, 2024 may have felt like yet another difficult year for private equity (PE) globally. Fundraising remained tough—down 24 percent year over year for traditional commingled vehicles, marking the third consecutive year of decline. Investment returns were muted, especially compared with buoyant public markets.

Our analysis reveals a more nuanced picture. After two years of murky conditions, private equity started to emerge from the fog in 2024.

For one, the long-awaited uptick in distributions finally arrived. For the first time since 2015, sponsors’ distributions to limited partners (LPs) exceeded capital contributions (and were the third highest on record). This increase in distributions arrived at an important time for LPs: In our 2025 proprietary survey of the world’s leading LPs, 2.5 times as many LPs ranked distributions to paid-in capital (DPI) as a “most critical” performance metric, compared with three years ago. There was also a rebound in dealmaking after two years of decline, with a notable increase in the value and number of large private equity deals (above $500 million in enterprise value). Exit activity, in terms of value, started to whir again as well, especially sponsor-to-sponsor exits.

This resurgence was powered by a much more benign financing environment. The cost of financing a buyout declined (even though it remains much higher than the ten-year average), and new-issue loan value for PE-backed borrowers almost doubled. In a sign of sponsors’ confidence amid improving financing conditions (spurred by monetary easing), entry multiples increased after declining in 2023, as sponsors could sell more companies at a higher average price per company.

The contrast between the past three years and the prior period could not have been starker. The rapid run-up in global interest rates from 2022 to 2023 (an increase of more than 500 basis points in the United States) shook private equity to the core, an industry that had acclimated to cheap leverage for nearly a decade. There was a raft of other macroeconomic challenges too, including persistent inflation and increased geopolitical uncertainty. These and other headwinds prompted a slump in dealmaking while creating unanticipated disruptions in portfolio companies. They also complicated managers’ ability to determine the true earnings of target companies, especially those purchased at lofty valuations in the aftermath of the COVID-19 pandemic. Even investors with near-term liquidity requirements—and conviction in the long-term value of potential acquisitions—struggled to execute deals in a cautious lending environment.

But private equity is now starting to surface from these challenges—likely more resilient and durable than before. In our LP survey, 30 percent of respondents said they plan to increase their private equity allocations in the next 12 months. Beyond offering LPs diversification, the continued appeal of the asset class can also be explained by its long-term performance trajectory. Since the turn of the millennium, private equity has outpaced the S&P 500—rewarding those investors who can stomach the relatively lower liquidity that typically characterizes private equity investments.

General partners (GPs), too, are evolving and innovating. In 2024, total global private equity assets under management (AUM) appeared to decline by 1.4 percent by the traditional measure of closed-end commingled funds. Yet this drop does not capture the novel ways in which GPs are unlocking alternative sources of capital, such as from separately managed accounts, coinvestments, and partnerships. These alternative forms of capital have provided a multitrillion-dollar boost to global private equity AUM. GPs are also increasingly sourcing new funds from noninstitutional investors, such as high-net-worth individuals. They do this through multiple channels (such as aggregators and wealth managers) and with multiple vehicles (such as open-end and semi-open-end funds)—all of which are more accessible than traditional closed-end vehicles to retail and high-net-worth investors.