Cycle, Structure, Selection: Private Equity Portfolios for Today’s Market

Bryn Gostin · Apollo Global Management

Deal costs are high, so buyers need deep industry insight to avoid overpaying in 2026.

2026 deal activity has rebounded, but it favors larger transactions. The deal cost index is relatively high. When entry costs are high, deal teams need much more insight and industry knowledge to form a differentiated view and avoid simply overpaying for assets.

“If you look at the data in 2026, the deal cost index is relatively high. So if the deal cost index is high, teams are gonna require much more insight and industry knowledge to develop a differentiated viewpoint and avoid simply overpaying for an asset.”at 1:28

Bryn Gostin · Apollo Global Management

Multiple expansion has collapsed as a return driver, so private equity now needs heavy operational value creation.

Multiple expansion used to make up almost two-thirds of private equity's industry returns. In 2026 it is under 10%. With that tailwind gone, managers need dedicated resourcing to drive operational value creation and reach private-equity-like returns.

“we've gone from a world where multiple expansion made up almost two thirds of the returns for private equity as an industry to less than 10% in 2026.”at 1:52

Bryn Gostin · Apollo Global Management

Exits are structurally harder now and require a dedicated team planning exit channels from underwrite onward.

The exit environment is more structurally involved, so assets cannot simply be brought to market and expected to sell. Teams should pressure-test exit channels (strategic sale, sponsor sale, or IPO) during underwriting, position the asset for likely buyers during ownership, and have the discipline to sell rather than wait for the last dollar of value.

“it's just a more structurally involved exit environment today, and I don't think that you can expect to just show up to market with an asset and expect it's gonna get sold.”at 2:13

Bryn Gostin · Apollo Global Management

Private equity's premium-to-public valuation gap is at a record; he expects it to narrow and PE to outperform.

The earnings multiple spread between private and public equity is wider than it has ever been. Translated into public-market terms, the S&P 500 is at an all-time high relative to private equity multiples. Private earnings growth has nonetheless been relatively durable. If the gap regresses and private earnings growth continues, private equity should see a period of material outperformance versus public equity.

“the earnings multiple spread is wider than it's ever been. ... the S and P 500 index is at an all time high vis a vis private equity earnings multiple. ... earnings growth has actually been relatively durable in the private equity markets.”at 6:30

Bryn Gostin · Apollo Global Management

Private equity returns are comparable to public equities in good decades but hold up far better in bad ones.

Over rolling ten-year periods, public and private equity both deliver roughly 18-20% annualized in good decades. The difference is downside: in a bad public-equity decade (zero or negative returns), private equity still delivers roughly 9-10% net. He argues this asymmetry makes private equity an asset class most investors should hold some exposure to.

“the good decades actually look remarkably similar. Both asset classes, public and private equity, deliver about 18 to 20% on an annualized basis back to investors. What's actually different is the volatility to the downside.”at 7:46

Bryn Gostin · Apollo Global Management

Vintage-year risk is the biggest private equity risk, so managers should deploy steadily rather than timing it.

Sophisticated allocators do not try to time private equity entry. They know vintage-year risk is their biggest exposure, and private equity is hard to turn on and off. The best vintages come from deploying consistently and methodically over time.

“they know that vintage year risk is your single biggest risk when investing in private equity. It's also an asset class that's very hard to just turn on and turn off deployment.”at 9:46

Bryn Gostin · Apollo Global Management

Zombie funds and lower distributions set up attractive private equity vintages ahead.

Distribution yields have fallen from around 20% to closer to 10%, and returns have lagged public equity. This has left zombie funds unable to raise capital, the first such period since the financial crisis. He argues this sets up very attractive go-forward years for private equity.

“We've seen lower distributions. We've seen distribution yields go from 20% down to closer to 10. ... All of that has led to some zombie funds that are unable to raise capital.”at 10:20

Bryn Gostin · Apollo Global Management

Private equity is a structural advantage over public markets through management alignment, change management, and resourcing.

Management incentive programs make it much easier to align management with investors in private markets. Private ownership also allows change management that public stability does not. Many small, underinvested companies can gain from private resourcing. Buying businesses in industries where best practice is known lets owners lift underperforming margins toward industry-leading levels.

“It is much easier to get the alignment story right between management team and investor base in the private markets in part because of these management incentive programs”at 11:21

Diana Sands · Apollo Global Management

Higher-for-longer rates and a rising cost of capital have been challenging for private equity markets.

Interest rates are expected to stay higher for longer. That has been challenging for private equity. Valuations are at peaks, the cost of capital is moving slightly higher rather than lower, and inflation remains a pressure.

“interest rates are expected to be higher for longer, and that has been challenging for private equity markets. As we're sitting here today, peak valuations, cost of capital going slightly higher, not lower, inflation still a pressure.”at 12:48

Bryn Gostin · Apollo Global Management

A value-oriented, flexible buyout strategy suits a late-cycle market better than heavy growth-tech deployment.

If the economy is late cycle, he would be careful about deploying too much into super-growth, momentum-driven technology. Those investments are sensitive to discount rates, and rates are expected to stay elevated. He prefers free-cash-flow and operational value-add strategies, which are driven more by alpha than beta, with the flexibility to pivot into distressed and dislocated opportunities if the cycle turns.

“I wanna be pretty careful with too much deployment into super growth oriented technology, momentum driven investments that tend to be more discount rate sensitive”at 14:03

Diana Sands · Apollo Global Management

Public markets have roughly halved in number and are dominated by a handful of mega-cap names.

Public markets have shrunk roughly in half. Concentration in a few names has risen steadily, from the FANG acronym a decade ago to today's Magnificent Seven or Fabulous Five. Public exposure is therefore dominated by a handful of stocks, which she cites as a core reason investors turn to private markets for diversification.

“Public markets has shrunk roughly in half. The concentration in a handful of names has increased over time.”at 5:09

Bryn Gostin · Apollo Global Management

Buying the S&P 500 today means top-ticking valuation momentum, which he finds hard to argue against.

With the index at elevated valuations after several strong years, putting a new dollar into the S&P 500 means buying near the top of valuation momentum. He concedes the momentum trade could keep running, but says the entry point is expensive.

“if you're putting a dollar to work in the S and P 500 today, you're top ticking valuation momentum. It seems hard to argue that's not the case.”at 6:11

Bryn Gostin · Apollo Global Management

Drawdown structures fit buyouts better than evergreens, while evergreens fit steady-cash-flow strategies like private credit.

Buyout assets are portfolio companies held for three to five years, while evergreen investors can redeem periodically, creating a timing mismatch. Evergreens also require all capital to be called up front, so undeployed cash drags on returns and pushes managers to deploy quickly instead of waiting for opportunities. Drawdown lets opportunistic buyout managers wait. Strategies with consistent cash flows, such as private credit and diversified secondaries, work well in evergreen form and can compound.

“the assets and liabilities really match much better in our view at Apollo in a drawdown structure because the assets are essentially the portfolio companies that the manager buys”at 18:11

Bryn Gostin · Apollo Global Management

Evergreen liquidity covers rebalancing needs but not dislocations, the same limit as any risk asset.

Evergreen structures work well for rebalancing liquidity, such as taking profits or diversifying. They are not reliable during a dislocation, whether fund-specific or macro, when investors may have to wait for capital back. He argues this is true of almost any risk asset: the S&P 500 is technically redeemable daily, but not sensibly so after a 30-40% fall.

“What's not necessarily going to be there is liquidity during some sort of dislocation, whether that is specific to the fund or broader from a macro perspective.”at 21:09

Bryn Gostin · Apollo Global Management

Parts of the US economy feel very late cycle, even as the Fed balances AI-driven growth against rate-sensitive sectors.

The Fed has a difficult job balancing a hyperscaler-driven AI economy against interest-rate-sensitive sectors such as autos, housing and credit card spending, which face more pressure. Within his firm's private equity investment committee, several areas of the economy feel very late cycle. He stays constructive on growth overall.

“When we sit within our private equity IC, there are just aspects of the economy that do feel very late cycle.”at 13:34

Bryn Gostin · Apollo Global Management

Private credit works well in evergreen structures because its cash flows can be deployed systematically.

Strategies with much more consistent cash-flow profiles can put capital to work systematically. That makes them suited to evergreen and semi-liquid vehicles, where capital is called up front. He names private credit as a clear example that works well in this structure.

“those where you can put capital to work in a little bit more of a systematic way. I'd include things like private credit, I think, works really well.”at 19:41

Bryn Gostin · Apollo Global Management

Bringing AI and tech to older-economy companies may unlock the biggest gains, since top talent avoids those firms.

Older-economy companies such as logistics businesses and manufacturing plants are the most likely to benefit from new technology. Top computer science graduates go to start their own companies or join tech leaders, not these firms. A private equity owner can bring technology and capability to these companies, which he says can unlock some 10x ideas.

“those are exactly the types of companies that have the potential to be the biggest beneficiaries from new technology. ... you actually have the ability to unlock some 10 x ideas.”at 23:48