Survival of the Pivoting: How Private Equity Is Splitting Under Pressure

Three years into a dealmaking drought, the private equity industry is no longer waiting to see whether conditions improve. The firms that are still raising capital, still transacting, and still attracting institutional money have made a decision: the old strategy is not coming back, and the question is not when the market recovers but whether your firm is positioned for what comes next. The firms that have not made that decision are beginning to find out what happens when investors make it for them.

The Pivot

The clearest evidence of deliberate repositioning comes from opposite ends of the geographic spectrum. Bain Capital has closed its largest ever Asia-focused private equity fund, raising $10.5 billion against an original target of $7 billion, with $9.1 billion coming from external investors alone¹. The oversubscription is striking given the broader fundraising environment. It reflects a calculated bet on Japan specifically, where corporate governance reforms championed by regulators and the stock exchange have pushed companies to sell underperforming businesses, and where a cohort of ageing founders is actively seeking exits outside of expensive auction processes¹. The drivers of Japanese deal activity, structural reform, demographic pressure, activist interest in undervalued companies, have nothing to do with SaaS valuations or AI disruption to software business models. That is precisely the point.

The same logic sits behind the merger of Global Healthcare Opportunities and CBC Group, which combines a London-based European healthcare fund with a Singapore-headquartered Asian investor to create a $21 billion entity that its founders describe as the world’s largest investment manager focused on healthcare². Fu Wei, chief executive of CBC, was explicit about the strategic rationale, arguing that healthcare would prove the “most defensive sector” because AI cannot provide standardised solutions to individual medical needs in the way it can replace the functions of a software business. The argument is that while every other sector faces AI-driven uncertainty, healthcare’s complexity and the structural demand created by ageing populations make it genuinely resistant to the disruption that has frozen software investment². Whether or not that thesis proves correct, the direction of travel is clear: firms with the scale and conviction to act are rotating hard into sectors and geographies where the AI overhang does not apply.

The Ones Being Left Behind

Not every firm has that option. Astorg, a French buyout group with €24 billion in assets, launched a new flagship fund to investors in November and has since been unable to reach first close, the minimum threshold at which a fund becomes operational and can begin investing³. Few investors in Astorg’s existing funds wanted to commit to the new vehicle, and the firm had been targeting at least €4 billion overall. The situation is compounded by the fact that Astorg has yet to sell IQ-EQ, a fund administration provider it bought a decade ago and had been hoping to exit for up to €9 billion last year, leaving it unable to demonstrate the kind of cash returns to investors that would make a new fundraise credible.

The returns on Astorg’s existing funds tell a similar story. Its 2019 and 2016 vehicles were valued at 1.5 and 1.7 times investors’ cash after fees respectively as of December, at a time when two times is considered strong performance. A failed attempt to raise a secondaries fund the previous year, which collapsed despite a boom in that specific market, and the detail that Astorg hired Goldman Sachs to explore a sale of the firm itself without finding a buyer, complete a picture of a firm running out of options.

Astorg is not alone in facing this pressure. EQT’s Per Franzén predicted last year that 80 per cent of all private capital groups could become zombies within a decade, managing existing holdings but unable to raise fresh capital or deploy new funds³. What the Astorg situation illustrates is that this process is not theoretical or distant. It is happening now, to a firm with a genuine track record and €24 billion in assets, in a market where investors have simply become too selective to back anything that cannot demonstrate clear returns and a credible exit pipeline.

The Banks Start Counting

The most structurally significant development across these articles is not the fundraising struggles of mid-sized European buyout firms. It is JPMorgan seeking to offload risk tied to more than $4 billion in net asset value loans backed by private equity fund assets⁴. NAV loans are the financial instrument that has allowed PE firms to paper over the exit drought, borrowing against the value of existing fund holdings to return cash to investors without actually selling anything. The market currently sits at around $100 billion and has been projected to reach $350 billion by 2030.

JPMorgan’s move to transfer risk on a portion of that exposure, offering investors a low-teens return for absorbing the first loss on the loan pool, is a signal that the stress in the system is moving upstream. The bank is not exiting the market, but it is quietly reducing its exposure to an industry that is struggling to exit its investments and whose portfolio companies, particularly in software, face AI disruption that regulators and analysts are increasingly flagging. Mitsubishi UFJ Financial Group is pursuing a similar risk transfer on loans to listed private credit funds. When the banks that built financing businesses around the world’s largest PE managers begin seeking risk transfers simultaneously, it tells you something about how they are privately assessing the probability that the exit drought resolves cleanly.

The use of NAV loans has also attracted scrutiny from US and European regulators, who have warned of leverage over leverage risks given that the underlying portfolio companies are already carrying heavy debt burdens. The concern that using NAV loans to support fund portfolio companies after the formal investment period could artificially inflate performance adds another layer of fragility to a system that is already under significant strain⁴.

Where This Ends

My view is that the industry is now in the early stages of a genuine numerical contraction, not just a cyclical slowdown in activity. The pattern visible across these four articles points in one direction: capital is concentrating at the top of the market, among firms large enough and strategically coherent enough to pivot into new sectors and geographies, while the middle of the market faces a slow squeeze from both ends simultaneously. LPs are not committing to new funds from firms that cannot show distributions. Banks are beginning to reduce their exposure to the NAV loan structures that have been subsidising those same firms. And the firms caught in between, too large to quietly wind down, too small to credibly pivot, are finding that even a sale of the business itself is not straightforward.

The speculation across recent months about mergers and consolidation as a survival mechanism is, I think, directionally correct but probably optimistic about the pace. The GHO and CBC merger is a deal between two firms that were already performing and chose combination as a growth strategy, not a rescue. The firms that genuinely need a merger to survive are less attractive as merger partners precisely because of that. What seems more likely over the next two to three years is a combination of forced wind-downs, failed fundraises that quietly kill firms without any formal closure, and a gradual reduction in the total number of active private equity managers as the fundraising cycle turns against all but the most demonstrably successful. The overall market value of the industry may fall not through dramatic collapses but through attrition, as zombie firms exhaust their management fee income and find themselves unable to raise the next vehicle.

The firms that avoid that fate will be the ones that moved early, decisively, and into sectors and geographies where the structural case for private equity remains intact regardless of what AI does to software valuations. Bain in Japan and GHO and CBC in healthcare have made that bet. The rest of the industry is running out of time to make it.

Footnotes

1. David Keohane, Bain Capital closes largest Asia fund after raising $10.5bn↗ (opens in a new tab), Financial Times, 17 May 2026. ↩ ↩²

2. Aanu Adeoye, Big Europe and Asian private equity health funds merge to defy AI disruption↗ (opens in a new tab), Financial Times, 20 May 2026. ↩ ↩²

3. Alexandra Heal, Astorg’s flagship fundraise struggles as private equity braces for shakeout↗ (opens in a new tab), Financial Times, 19 May 2026. ↩ ↩²

4. Michelle Chan and Jill R Shah, JPMorgan looks to offload exposure to $4bn in private equity-linked loans↗ (opens in a new tab), Financial Times, 22 May 2026. ↩ ↩²