Everyone in private equity keeps talking as if the old playbook is just having a temporary wobble.

It isn’t.

Hamilton Lane’s 2026 Market Overview basically says the industry is now running on three fumes: no liquidity, manufactured optimism, and everyone pretending the exit market will sort itself out. They call it a liquidity drought. Quite polite of them. Four years in and 2025 still came in hundreds of billions short of what a normal distributions market should look like.

Meanwhile, PE has underperformed public markets over one, three and five years, with the Mag 7 making the gap look even uglier in the short term.

So where is the money going?

Secondaries, because supply is outstripping capital and buyers can still get real pricing discipline.

Private credit, because despite the annual ritual of calling it a bubble, Hamilton Lane says spreads versus BSLs are holding and there is “no sign of stress” in those spreads or returns.

And evergreen funds, because apparently investors finally decided they’d rather not need an army of accountants and a hostage negotiator just to access private markets. Hamilton Lane says private credit evergreen AUM has gone from effectively zero to $500 billion in the last decade.

The takeaway is fairly obvious.

Financial engineering is not dead. It’s just no longer enough.

If your value creation plan still consists of leverage, a procurement slide, and a man from McKinsey explaining margin expansion with a triangle, you are going to have a very character building few years.