Private Markets in 2026: Macro Trends and What They Mean for Deal Flow

Private markets are entering 2026 in a different operating environment from just a few years ago. Capital remains abundant, but deals are fewer. Holding periods are longer. Sustainability scrutiny has deepened. And AI has moved from experimentation to day-to-day investment workflows.

Sylvain Forté, CEO and co-Founder of SESAMm, and Dr. Benjamin Krusche, Strategy Director at Clarity AI, unpacked in a recent webinar what changed in 2025 and why those changes are reshaping how deals are sourced, evaluated, and monitored going forward.

1. The End of Set-It-and-Forget-It Diligence

The most forward-looking insight from the conversation is also the one with the clearest implications: the traditional model of doing due diligence once and treating that package as fixed is becoming obsolete.

“The traditional world of doing due diligence once and leaving the package as it is will look very outdated,” said Krusche. “People are moving to continuous, fluid monitoring of risk.”

This shift is being driven by longer holding periods, more complex assets, and the recognition that a point-in-time assessment cannot capture how a company evolves over three, five, or seven years of ownership. Risks that were invisible at acquisition — in governance, operations, supply chains, or reputations — can surface well after the deal closes.

“Companies tend to be held in portfolios for a longer time,” noted Forté. “That need for information has increased — to make sure there are no emerging operational, governance, litigation, or reputational risks that were not captured at the diligence stage.”

The corollary is that static data will also fall out of favor.

“Relying on once-a-year collected data points from private companies will look very old-fashioned,” said Krusche. “The future is dynamic: static data overlaid with an intelligence layer that tracks real-world events.”

This is arguably the biggest structural shift in private market workflows right now. Not just a product upgrade, but a change in how investors think about the relationship between diligence and ownership.

2. Macro Context: Selectivity, Secondaries, and Supply Chains

At a macro level, 2025 was shaped by a familiar combination: large amounts of dry powder, valuation resets, and a reduced number of completed deals. But operationally, this environment triggered a specific change in how deal teams work.

“What happens operationally in that context is that the level of selectivity is increasing,” said Forté. “Due diligence is getting more and more complex, more and more detailed.”

With fewer transactions to close, investors are spending more time per deal. Private equity firms are doing more work internally before engaging external advisors — using data tools to understand assets, surface questions for management, and raise the quality of their preparation before bringing in consultants or law firms.

The Secondaries Challenge

Secondary transactions have grown rapidly, adding volume and a specific kind of time pressure to due diligence processes. A secondary deal team may receive a portfolio of 150 companies and need to provide a response within 24 hours, often with limited access to the underlying portfolio companies themselves.

“The burden in terms of due diligence, including sustainability due diligence on secondary transactions with hundreds of thousands of lines, has increased significantly,” Forté noted. 

The practical challenge is both the volume and that traditional diligence methods, including manual searches, cannot keep pace. This has created strong demand for automation, particularly for exclusion screening at scale.

Supply Chain Enters the Diligence Room

Supply chain resilience has also moved from a background concern into the diligence process itself. 

“In 2025, supply chain made its way into due diligence itself,” said Forté, describing cases where firms now evaluate Tier 1 suppliers and sometimes map the suppliers of suppliers.

This matters for deal flow because supply chain exposure, particularly around human rights, sanctions, and geopolitical risk, increasingly influences pricing, deal structure, and go/no-go decisions.

3. Sustainability: From Reporting Burden to Investment Input

One of the clearest themes in the discussion was the evolution of sustainability data away from compliance-driven reporting toward decision-making relevance. But the picture is more nuanced than a clean break.

“Sustainability data traditionally was very much a reporting burden,” said Krusche. “What we’re now seeing is a split: some still do it just for reporting, but others are integrating it much deeper into their investment layer and taking financial materiality far more seriously.”

On the reporting side, much of the groundwork has been laid. “The basic reporting that caused a lot of headaches three or four years ago is a solved problem now,” Krusche observed. Most clients have established proxies, collected data, and built workflows through external providers or internal systems.

The interesting movement is at the investment layer. Investors who have moved beyond box-ticking are now asking sustainability data to do harder work: helping price risk, manage downside scenarios, and in some cases, identify opportunities in sectors aligned with energy transition or decarbonization.

“Our clients are asking for directly collected data, proper quantitative KPIs, and validation at the point of engagement with the company,” said Krusche. “That’s what enables continuous due diligence and continuous monitoring of risk.”

Meanwhile, Limited Partners (LPs) expectations remain fragmented. General Partners (GPs) must report in different ways to different investors, tailoring exclusion lists, applying bespoke criteria, and managing custom workflows at scale. 

“There’s still a fragmentation of sustainability expectations,” said Forté. The practical response is not to standardize the inputs, but to standardize the workflow so that customization happens once and can then be executed consistently.

Notably, Krusche observed an interesting divergence between Europe and the US. In the US, where the term “ESG” has become politically charged, some investors are actually further along in integrating sustainability data into their investment committee processes precisely because they are less focused on regulatory compliance and more focused on financially material risk.

4. AI in Practice: The Trust and Auditability Problem

AI adoption in private markets investment workflows has progressed meaningfully, but the central barrier to deeper integration is not capability. It is trust and auditability.

“We started in a world of chat interfaces based on foundational models,” said Krusche. “What people realized is that you get a lot more value if you specialize in a specific vertical and tailor those foundational models to the exact use case.”

That specialization has produced a real shift: from outputs that were inconsistent and hard to audit, to structured workflows where the logic is traceable and results are reproducible. But stability and traceability are now strict conditions for adoption.

Forté was direct about this: “If you generate a due diligence report but the risk categories change every single time, and you’re not sure what has been checked or not, it’s a nightmare.” 

For AI tools to be trusted in a professional investment context, the outputs need to be consistent, the sources need to be traceable, and the reasoning needs to be visible enough for a human decision-maker to stand behind it. This is what Krusche described as the shift from chatbot to investor-grade output. 

“The second bit I see in high demand is traceability of output. How do you make sure it’s reliable from an existing source? How do you trace where it’s coming from? How do you surface this for the user?” The goal is not AI that replaces judgment. It is AI that structures the evidence so human judgment can be exercised faster and more confidently.

“These workflows stop at the point where the human makes the decision,” Krusche explained. “But instead of taking two weeks, you can now do that in an hour.”

For deal flow, this means faster screening, better prioritization, and a meaningful reduction in the manual burden, particularly in secondaries, where scale and speed requirements previously outstripped what any team could do manually.

5. The Convergence of ESG, Risk, and Supply Chain

Looking ahead, one of the more consequential structural trends is the blurring of boundaries between functions that have historically been separate: ESG, reputational risk, KYB (Know Your Business), KYC (Know Your Customer), and supply chain analysis.

“The boundaries are fading,” said Forté. “Platforms will be expected to serve multiple use cases from one data layer.” The same underlying data about a company’s suppliers, controversies, regulatory exposure, and counterparty relationships increasingly serve compliance, risk, ESG, and diligence functions simultaneously.

This convergence is also reshaping teams. Sustainability functions are being absorbed into broader risk and investment processes, and in some cases, the teams are under pressure as clients consolidate budgets and look for more integrated solutions.

The practical implication is that the vendors and platforms that survive will be those that can serve multiple use cases from a single, well-structured data layer rather than maintaining separate tools for each function. AI agents, with their ability to apply the same underlying data to different analytical tasks, are well-suited to this model.

What This Means for Deal Flow in 2026

These trends converge on a clear direction for private market deal flow: it will be slower in pace but higher in analytical depth, with continuous monitoring increasingly expected as a standard part of the ownership model.

Forté’s closing point was understated but worth taking seriously: “Private markets will continue to be an early adopter in both ESG and AI.” The fragmentation of processes that makes private markets operationally complex also creates room for innovation. Firms that invest in the right infrastructure now (trustworthy, auditable, scalable) are building a durable advantage in how they manage information across the deal lifecycle.

Capital will always matter. But in an environment where deals are harder to find and longer to hold, the quality of information and the ability to act on it continuously is increasingly what differentiates how portfolios perform.