Capital Allocators – Inside the Institutional Investment Industry

Episode: WTT: Can Private Markets Normalize?
Date: February 12, 2026
Host: Ted Seides

Episode Overview

In this “What’s the Trade?” solo episode, Ted Seides explores a critical, timely question: Can private markets normalize? He dissects whether the private equity industry can return capital—and raise funds—at a sustainable pace in today’s environment. Seides offers a candid, data-driven analysis, focusing on persistent exit bottlenecks, the mismatch between supply and demand, and the profound implications for the future of private equity.

Key Discussion Points and Insights

1. The Exit Problem: Why Private Markets Aren’t Normalizing

• Key Point: The ability for private markets to recycle capital fast enough for successive fundraising “without strain” is increasingly out of reach.
• Holding Periods: Private equity firms now hold portfolio companies for more than 6 years on average.
• Underlying Issue: There are simply “too many portfolio companies [that] cannot find a buyer.” (00:48)

Notable Quote:

“Private equity professionals don’t have different genes than other investors. They face a structural problem.” — Ted Seides (00:47)

2. Supply and Demand in Private Equity

A. Purchase Activity

• Over the past decade, global private equity funds’ unrealized value has tripled, from $1.1T to $3.2T.
• Demand is robust due to institutional allocations and historic returns.
• Private equity firms have $1.2T in dry powder.
• Underallocated pools (private wealth, insurance, and sovereign wealth funds) are ramping up exposure, bolstering future demand.

Notable Quote:

“Both demand for private equity exposure and the supply of acquisition opportunities are well positioned for growth.” (03:28)

B. Exit Activity

• Exit volumes have not kept pace with purchase activity.
• Structural challenge: Investors (LPs) are limited in their ability to deploy new capital when so much is tied up in existing funds, slowing the fundraising cycle.
• The bottleneck: The demand for companies being sold is low, not the supply for sale.

Notable Quote:

“Everyone wants exit activity to accelerate. The bottleneck lies on the demand side—the buyers of private equity-backed businesses.” (05:25)

3. The Mechanics of Exits

• Exit Routes:
  • Sponsor-to-sponsor transactions: Expected to increase as bid-ask spreads narrow post-strong economic performance.
  • IPOs: Market remains unattractive as the shimmer of public life fades and private capital abounds.
  • Strategic buyers: Historically stronger, but have not increased activity—strategic buys are flat in both volume and deal count despite massive growth in PE ownership.

Stats:

• Private Equity currently owns 29,000 unsold companies with $3.6T in unrealized value; many held more than 5 years.
• Strategic buyers: Flat at 700 deals or $250–300B a year (08:10–08:45).

4. Implications for the Private Equity Industry

A. Structural Changes Are Coming

Seides forecasts several shifts:

1. Fund Structure:
   Traditional finite-life funds are not fit for prolonged holding periods. Expect continued growth in secondaries and continuation vehicles, but these are “liquidity solutions,” not demand-side answers.

2. LP Portfolio Construction:
   With longer holding periods, LPs will likely reduce commitments or rethink strategies. Referenced Seides’ previous topics: “Reconstructing Private Equity Portfolio Construction for the Post-Distribution Drought” and “Private Equity Investing in 2030.” (10:01)

3. GP Fortunes and Industry Shakeout:
   The industry can’t sustain thousands of funds. The top 10 funds now capture 36% of capital raised, while a third of funds are on the road 2+ years before closing—shakeout is looming.

   Notable Quote:

   “Winners and losers are already emerging.” (11:05)

4. LP-GP Relationships:
   Many General Partners (GPs) face genuine business issues, but Limited Partners (LPs) are mostly holding steady. However, misalignment is growing, especially as “zombie” GPs (those with undermanaged assets) become more common.

   Memorable Insight:

   “Unlike after the GFC, LPs are not materially overextended in privates. However, alignment erodes. When a GP becomes a zombie, the problem of undermanaged or unmanaged assets will grow.” (12:17)

5. The Uncertain Road Ahead

• The range of outcomes for private equity has never been wider.
• Unless there is a dramatic and sustained increase in demand for exits (from IPOs or strategic buyers), normalization will continue to elude the industry.
• “Change is coming.” (13:05)

Closing Remark:

“One thing is certain. Without a dramatic and sustained increase in exit demand from IPOs or strategic acquirers, normalization will remain elusive. And change is coming.” — Ted Seides (13:05)

Highlight Timestamps

• 00:00–01:30: The core question—can private markets normalize?
• 02:00–04:30: Deep dive into supply/demand dynamics for purchases and exits.
• 05:25–08:45: Detailed analysis of exit bottlenecks, data on unrealized portfolio companies.
• 09:00–12:30: Implications for funds, LP strategy, GP/LP dynamics, and looming shakeout.
• 13:05: Closing summary and warning about structural change ahead.

Tone & Language

Seides employs a measured, analytical tone—direct and data-rich, yet accessible. His assessment is honest, at times skeptical, and closed with a sense of urgency about likely industry evolution.

Summary

Ted Seides' analysis makes clear: private equity exit routes are structurally constrained, and normalization is unlikely without a sea change in IPO or strategic exit demand. The result will be profound industry shifts—fund structural changes, altered LP strategies, industry consolidation among GPs, and evolving LP-GP relationships. The private markets, Seides warns, will not “normalize” anytime soon. And for institutions and asset managers, understanding and adapting to these changes is paramount.