Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It’s a pivotal moment for private equity. Investors — anxious about recession risks, ongoing market volatility, and tightening credit — are increasingly seeking returns uncorrelated to public markets. While private equity can deliver attractive entry points — particularly in dislocated markets — success hinges on investing with established, top-tier managers and maintaining deliberate vintage diversification. This targeted approach is essential to navigating uncertainty and unlocking long-term growth.
Private equity has outpaced the S&P 500 since the turn of the millennium, according to McKinsey.1 On top of this, historically, private equity has delivered strong performance post-market corrections. DealEdge data shows that buyout firms generated superior returns after the tech bubble and the global financial crisis (GFC): The median buyout deal internal rate of return (IRR) in 2000, prior to the tech bubble burst, was 11%. In the three subsequent years, IRRs were 25%, 40%, and 47%, respectively.
A similar pattern emerges following the GFC. In 2007 and 2008, median IRRs were 9%; in the three consecutive years, IRRs reached 24%, 18% and 19%, respectively.2 Conversely, while buyout investments performed well in those years, Bain & Company data shows that post-GFC, one in four buyout firms never raised another fund,3 effectively shutting down, and highlighting the high stakes of manager selection. Investors allocating to managers without proven track records risk losing substantial capital if those firms fail to survive periods of market turmoil.
Recent fundraising constraints have created an even more selective general partner (GP) landscape as smaller and underperforming funds have struggled to raise capital. Fundraising was down 24% in 2024 for traditional commingled vehicles, the third consecutive year of decline, according to McKinsey.4 However, successful managers have distinguished themselves by sourcing the highest-quality deals amid volatility, maintaining disciplined pricing, and actively adding operational value to portfolio companies.
Given fears of a looming recession, it is critical that advisors position themselves with these managers ahead of a downturn. They must ensure they have exposure to institutional-grade managers with established track records and make a concerted shift from broad private equity exposure to curated, top-tier access.
One way to manage the risk of private equity investing is through vintage diversification — committing capital across multiple market cycles to reduce exposure to any single vintage year. In the first few years, capital outflows exceed inflows as investments are made. However, after this point, distributions from earlier vintages begin to exceed new investments, resulting in net positive cash flows and long-term returns.
This approach has several benefits: reducing timing risk by avoiding concentration in a single vintage year, smoothing long-term return profiles, and ensuring ongoing access to a broader set of private market opportunities. In fact, picking only select vintages — rather than maintaining an annual commitment to private markets — can significantly harm returns. For example, if an investor had missed out on the best vintages from 1986 to 2010, this would have hurt performance twice as much than if they had avoided the worst vintages, according to UBS and Burgiss data.5
For many individual investors and advisors, evergreen vehicles — open-ended structures that allow for ongoing capital raising and reinvestment — have seemed like an optimal way through which to get vintage diversification. However, while evergreen funds offer accessibility, they may lack the institutional rigor of closed-end structures. In some cases, asset quality may vary, and these vehicles can be used to provide GP liquidity rather than optimal portfolio performance.
A more effective solution lies in platforms providing access to institutional closed-end private equity funds. These platforms allow investors to customize their portfolios, ensuring exposure to vintage diversification and top-tier quality managers and assets. Ideally, these structures mirror institutional offerings often associated with endowments, foundations, and pension funds, delivering long-term value creation with appropriate illiquidity risk.
The opportunity is here for advisors to position themselves appropriately for the next cycle. Although the macro environment is uncertain, several tailwinds exist: Private equity firms hold large reserves of dry powder, portfolio valuations are more favorable than in recent years, and manager quality is higher due to a more disciplined fundraising cycle.
For advisors, the environment presents a rare opportunity: stronger entry valuations, high levels of capital yet to be invested, and a more selective fundraising market. For advisors, this is the moment to design client portfolios intentionally — with the right managers, diversified vintages, and long-term growth in mind.
Steven Brod is a senior partner as well as the chief executive officer and chief investment officer at Crystal Capital Partners.
1 Edlich, Alexander and Croke, Cristopher, and Dahlqvist, Fredrik, and Teichner, Warren. May 20, 2025. McKinsey. Global Private Markets Report 2025: Braced for shifting weather. https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report
2 MacArthur, Hugh and Rainey, Brenda. Jul. 18, 2022. Bain & Company. Shifting Gears: Private Equity Report Midyear 2022. https://www.bain.com/insights/shifting-gears-private-equity-report-midyear-2022/
3 Canderle, Sebastien. Dec. 20, 2023. CFA Institute. Private Equity: Five Lessons from the Global Financial Crisis. https://blogs.cfainstitute.org/investor/2023/12/20/private-equity-five-lessons-from-the-global-financial-crisis/#:~:text=Post%2DGFC%2C%20one%20in%20four%20buyout%20firms%20never,including%20top%2010%20European%20buyout%20shop%20Candover
4 Edlich, Alexander and Croke, Cristopher, and Dahlqvist, Fredrik, and Teichner, Warren. May 20, 2025. McKinsey. Global Private Markets Report 2025: Braced for shifting weather. https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report
5 Friedemann, Laeticia and Cherif, Karim. Jul. 29, 2024. UBS. The importance of vintage diversification. https://www.ubs.com/de/en/wealthmanagement/what-we-offer/investing/private-markets/_jcr_content/root/contentarea/mainpar/toplevelgrid_1982793302/col_1/linklistnewlook/link_copy_copy.1118360481.file/PS9jb250ZW50L2RhbS9hc3NldHMvd20vZ2xvYmFsL2Npby9ob3VzZS12aWV3L2RvY3VtZW50L3ZpbnRhZ2UtZGl2ZXJzaWZpY2F0aW9uLTIwMjUucGRm/vintage-diversification-2025.pdf
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
More 529/College Planning Topics >
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.