The model that defined private capital for two decades — cheap debt, financial engineering, locked-up money — is breaking. What replaces it looks less like finance and more like running a business. And it is not a story about private equity alone: the same forces remaking public markets are remaking private ones.
“If there is anything to do, there is certainly a best way to do it, and the best way is both the most economical and the most graceful.” — Inazo Nitobe
When the most patient money in the world starts looking for the exit, it is worth asking why. Through 2025, the great university endowments — the institutions that practically invented long-term investing — began quietly trying to sell parts of their private equity portfolios. Yale, whose approach every other endowment copied, moved to offload around $2.5 billion of private holdings; Harvard explored a sale of its own; Canada’s national pension fund sold over a billion dollars of fund stakes in a single month. When we first flagged these signals in the spring of 2025, the temptation was to call it routine housekeeping. It is not. It is the clearest sign yet that something in the private equity model has broken.
What private equity actually is
Strip away the mystique and private equity is a simple idea. A firm raises money from large investors — pension funds, endowments, wealthy families — and combines it with a great deal of borrowed money to buy companies. It improves or grows those companies, holds them for a few years, and sells them at a profit. The investors’ money is locked away for the better part of a decade; the reward for that patience is meant to be returns the public markets cannot match. For twenty years, in a world of steadily falling interest rates, it worked spectacularly.
That world has ended, and with it the three things the model quietly depended on: cheap debt, ever-rising valuations, and the patience of its investors. All three are now in doubt.
Cheap debt is gone. Companies bought with mountains of borrowing now struggle to carry it: by 2023 the average buyout-owned company earned only about twice what it owed in interest each year, down from three times not long before — a thinner cushion than it sounds, and one reason firms owned by buyout funds have been defaulting at noticeably higher rates than other companies. Rising valuations are gone too: you can no longer count on selling a company for a richer price than you paid simply because money has become cheaper. And the patience is gone — which is precisely what the endowment sales reveal.
Three cracks, in plain terms
The money is stuck. Firms are sitting on a record pile of companies they cannot sell — more than 18,000 of them worldwide, worth trillions. The usual exits, a stock-market listing or a sale to a larger company, have largely closed. So increasingly they sell to each other: nearly half of 2024’s exits were one buyout firm selling to another — a game of pass-the-parcel that hands no actual cash back to the original investors.
The values may be fiction. Because private equity does not trade on a public exchange, firms value their own holdings by their own estimates — what the industry calls marking to model. Those estimates have been slow to fall. McKinsey’s research suggests the marks on ageing assets sit around 17% above what a buyer would actually pay. Investors are, in effect, being told their holdings are worth more than the market will bear — a comfortable fiction, until someone tries to sell.
The investors are trapped. When public markets fell, private equity automatically became a larger slice of every portfolio: the listed shares shrank while the unsold private holdings did not. Pensions and endowments suddenly found themselves over their own limits on how much private equity they were allowed to hold — well over half of them, by early 2025. The only way back within the rules is to sell. Hence the endowment exits, and a flood of stakes hitting the second-hand market — where investors offload locked-up fund positions early, usually at a discount, and where those discounts have now widened sharply.
The strain surfaces in real companies, sometimes politically. In late 2024, France reacted with alarm when a major French pharmaceutical group moved to sell a controlling stake in its consumer-health arm — the maker of a household-name paracetamol brand — to a large US buyout firm, in a deal valuing the unit at around €15 billion. Politicians threatened to intervene, fearing a financial owner would cut jobs or move production of essential medicines; the government relented only once the state investment bank took a stake. It captured the tension of the moment: a model built for financial returns colliding with assets that a society treats as strategic.
The larger story
It would be easy to read all this as a story about private equity alone. It is not. It is one chapter of a larger reordering — the same one running through everything we have written.
The structures that defined investing for a generation were built for a particular world: cheap money, abundant liquidity, and information that moved slowly enough to be an edge. That world is dislocating. And the same two forces are reshaping every corner of it — the macro break we have called the Great Dislocation, and the arrival of technology that collapses the cost of doing what investment firms do.
In public markets, that reordering shows up as the rise of passive investing and the long squeeze on traditional active management — the subject of our earliest essays. In private markets, it shows up as the end of financial engineering as a reliable source of returns. The common thread is simple and unforgiving: when you can no longer make money from cheap leverage or from a rising tide, the only durable edge left is making businesses genuinely better — and doing it more cheaply and intelligently than anyone else.
What comes next
That is what the next generation of private capital will be built on. Not the old reflex of buy, borrow, and flip, but a different set of capabilities. Patient capital that stays long enough for real value to compound, rather than money forced to sell on a fund’s calendar. Genuine operational engagement — an owner who improves how a company actually runs, not just how its balance sheet is arranged. And technology threaded through the whole process: an operating system for private capital that automates the manual machinery of investing and turns data into faster, sharper decisions. The leading firms are already moving this way. McKinsey now finds that the best funds draw far more of their returns from growing revenue and margins than from financial leverage — a quiet reversal of the formula that defined the industry.
This is the model we are building Viquo around, because it is where the whole of investment is heading. The advantage no longer lies in access to cheap debt, or in the opacity that let returns look better than they were. It lies in judgement, in operational skill, and in technology that lets a small, sharp team do what once required an army. In private capital, as in public markets, the middleman is becoming code — and what remains for people is the part that was always the point: deciding well, and building well.
Private equity is not disappearing. But the version of it that thrived on cheap money and clever financing is. What replaces it will look less like financial engineering and more like building companies — patiently, operationally, and with far better tools. The firms that understand this will define the next era. The rest are holding assets they cannot sell, at prices the market does not believe, waiting for a tide that is not coming back.
Where this leads — The macro break driving this reordering is The Great Dislocation (2025); the same forces remaking public-market asset management run through Unlocking the Active vs Passive Debate (2024) and The Return of Judgement (2026); and the operator-led, technology-native model this essay points toward — an operating system for private capital — is set out in Viquo: An Agentic Operating System (2026).
Viquo Insights presents the editorial views of the author and the firm’s ongoing, exploratory thinking. It is provided for information and discussion only, and is not investment advice, nor an offer or solicitation to buy or sell any security or to adopt any investment strategy. You should do your own research, and we would always be very happy to know what you think, what you find, and how we can learn together.