Momentum is building on several fronts as private markets head toward the New Year. Exits are reappearing, secondaries remain active and AI is accelerating change across strategies and asset types. With private equity firms now outnumbering McDonald’s locations worldwide, the landscape offers more choice than it has in quite some time.
In this instalment of Beyond the Portfolio, Michael Miranda, President, BMO Family Office and Head of Investments, BMO Private Wealth, breaks down the forces shaping private markets with Rod Larson, Managing Director and Head of Investment Manager Research & Alternatives North America, and Arthur Diochon, Director and Head of Private Markets Research, North America.
Here are some highlights from the discussion.
Signs of life in the exit environment
Exits “oil the wheels of private markets,” Rod Larson says, by freeing up capital and setting the stage for the next round of investing. They return proceeds to investors, give managers room to raise new funds and help founders and employees capture the value they’ve built. That pace has slowed in recent years, he says, resulting in a two-decade high in the number of unsold companies.
But there were signs of movement in 2025, with a pick-up in IPOs and the strongest quarterly deal value in four years. Larson sees the buildup as momentum moving back into the market. “The backlog of companies waiting to be sold is like a dam that’s about to break,” he says. “Once it does, the benefits could be realized in a relatively short period of time.”
Secondaries take centre stage
With distributions slowing, secondaries have become a natural place for investors seeking quicker liquidity, Arthur Diochon says. These strategies buy into companies later in their development, improving the likelihood of earlier cash flows. Private equity firms have also leaned on this market as a practical way to return capital when traditional exits prove harder to achieve or unattractive.
Fundraising strength and record deal flow have shifted the secondary market’s balance, Diochon says, tightening pricing and widening the gap between managers. His team has responded by becoming more selective. “For our core secondaries, we’re even more choosy,” he says. “We really want to make sure we're partnering with the right groups – those that are not just getting good prices but are hopefully going to give good outcomes.”
Looking past the AI hype
AI is showing up across private markets in very different ways, but Larson says it helps to strip away the noise and look at the foundations. Diochon draws a parallel to the early days of the internet, when the ideas were already taking shape, but the infrastructure hadn’t caught up. Today, the buildout required for AI – from power to data centres to connectivity – is enormous and he expects the investment wave to create a broad range of opportunities.
His view is that investors should look across tools, platforms and the companies using AI to improve their businesses, rather than make narrow bets. “The winners could arguably win on a scale we’ve never seen and more than compensate for exposure to the losers,” he says.
Diochon also points to venture capital as one of the clearest areas where AI is reshaping the landscape. In early-stage investing, he says accuracy matters more than short-term pricing and the best opportunities are being concentrated by managers with the deepest access to talent and deal flow. “Now more than ever, it’s risky to be a tourist in venture capital – and particularly in AI – because a lot of the best names are being quickly gobbled up by some of the most prestigious managers with the greatest access to the space,” he explains.
Manager selection matters more than ever
Diochon doesn’t expect private market returns to look dramatically different in the years ahead but he does expect the spread between managers to widen. With so many new firms in the space, he says the challenge is separating true skill from polished marketing – something the team spends a great deal of time analyzing.
The expansion of the industry has reinforced the need for a more selective approach when picking managers as competition increases. “We’re really laser focused on who is the best in class, who has the most durable return profile and who’s not relying on things such as low interest rates to drive returns,” Diochon says. “While we hope rates go down, we don’t know that they will. We want a secondary strategy to be durable through all climates.”