U.S. private equity deal value was down 14.1% in Q3, PitchBook says

The private equity sector has experienced a prolonged downturn, reflecting a pattern similar to a Groundhog Day scenario.

"You hear it year after year," remarked Kyle Walters, a PitchBook analyst. "In 2023, the sentiment was: 'This could be the year for recovery.' As we moved into 2024, expectations shifted again to 'next year will be different.' In 2025, those involved hoped for improvement, with thoughts of 'perhaps this will be the turnaround year.'"

With over $3 trillion in assets under management, U.S. private equity continues to grapple with an environment characterized by geopolitical instability and potential interest rate hikes, along with the pressures of a market that is becoming increasingly concentrated with limited exit opportunities. This trend was evident in Q3 2026, as exit value declined by 14.1% year-over-year, while overall deal value fell by 13.6% within the same timeframe, according to data provided by PitchBook.

"The growth rate of assets under management (AUM) for this asset class has not been as robust as in prior years," Walters noted. "Historically, we've observed a 12% annual growth rate over the past 10 to 15 years. Currently, we are experiencing growth rates closer to 6%. This represents a new normal where deploying capital is challenging due to market headwinds and unresolved issues affecting companies entering the market."

Walters emphasized that fundraising has become particularly challenging, noting it has "definitely become harder over the last 18 to 24 months."

"This is partly due to limited exit opportunities," Walters observed in his discussion with Fortune. "If general partners (GPs) are not delivering distributions, then there is less capital available for deployment, necessitating a focus on a smaller pool of managers. This shift is taking shape, although it does not indicate fewer managers are seeking to raise capital; rather, it means that fewer managers are successfully completing fundraising rounds and are competing over a diminishing share of available funds."

However, this does not apply universally. The larger firms continue to demonstrate strength. For instance, KKR successfully achieved its $300 billion fundraising target, initially set for three years, in just 30 months. Nevertheless, anticipated interest rate hikes—potentially occurring before year-end—could exacerbate challenges for the sector.

"[If there is a rate hike] instead of the gradual recovery I have been envisioning, we may end up seeing a Q4 that mirrors Q3 closely," Walters stated. "While it's not disastrous, it is also not at the level we hoped for in 2025, yet it remains an improvement over the stagnation observed in 2022 and 2023 when market activity was minimal. Private equity has largely anticipated these conditions, so they have prepared for the upcoming rate hike. Should it not materialize, it would be a welcome surprise. Transactions will continue to occur, but they are unlikely to reach the scale initially expected for the year."

Reinforcing the repetitive forecast from Groundhog Day: "It’s going to be cold, it’s going to be gray, and it’s going to last you the rest of your life."

Venture Capital Deals

• TypeSafe AI, a San Francisco-based developer of AI models for software automation, secured $870 million in funding, led by Andreessen Horowitz, with participation from Sequoia and existing investor DCVC.

• Oratomic, a Pasadena, California-based company specializing in fault-tolerant quantum computers, raised $475 million in Series B funding, led by ARCH Venture Partners, Spark Capital, Khosla Ventures, Index Ventures, General Catalyst, and Bezos Expeditions.

• Oxide Computer Company, based in Emeryville, California, which develops on-premises cloud computing systems, has raised $445 million in Series D funding, led by Eclipse, along with USIT, Riot Ventures, Jane Street, and other investors.

• Kapta Space, a Seattle-based developer of spaceborne radar payloads, completed a funding round of $24 million in Series A financing, led by Washington Harbour Partners and Bison Ventures, with additional participation from MetaVC and others.

• Loops, a commerce AI startup with locations in San Francisco and Istanbul, Turkey, acquired $3.5 million in seed funding through a16z speedrun, along with contributions from NTT Docomo, Connecticut Innovations, Alumni Ventures, and Monday Capital.

Exits

• AEA Investors and British Columbia Investment Management Corporation acquired Rensa Filtration, an Aurora, Illinois-based manufacturer and distributor of high-purity air-filtration solutions for critical applications, from Audax Private Equity. Financial terms of the deal were not disclosed.