US private equity entered 2026 with real momentum - improving financing conditions, a significant backlog of delayed processes and sustained institutional demand for scaled assets. But the market that emerged is structurally different from the 2020-2021 peak era. Capital is concentrating around specific strategies, sectors are being re-evaluated through an AI lens, and the exit environment, while improving, is demanding selectivity that sponsors have not faced since the pre-zero-rate world.
Ropes & Gray's US PE Market Recap for May 2026 captures the defining characteristics of the current deal landscape. The single most significant shift is the rotation of institutional capital toward what the report terms "HALO" assets - Heavy-Asset, Low-Obsolescence - as the AI-driven investment wave encounters practical infrastructure constraints.
"Investors are rotating toward tangible enablers such as data centres, power, semiconductors, and connectivity. HALO assets are becoming increasingly attractive as they support AI deployment and offer more controllable value creation, visible demand and contracted, mission-critical revenues."
- Ropes & Gray, US Private Equity Market Recap, May 2026The HALO asset rotation - what is driving it
The HALO rotation reflects a specific maturation in how institutional capital is thinking about the AI investment cycle. The first wave of AI investment - concentrated in software, application-layer companies and large-cap technology - has begun to face headwinds as buyers reassess how agentic AI reshapes product differentiation, pricing power and customer stickiness. Software's share of PE buy-side activity continues to reset from its 2020-2021 peak as sponsors underwrite more cautiously.
HALO assets by contrast offer what the current environment rewards: contracted revenues, visible demand driven by AI infrastructure build-out, lower obsolescence risk than application-layer software, and value creation that is more controllable through operational improvement rather than dependent on multiple expansion. Data centres, power generation and transmission infrastructure, semiconductor supply chain assets and connectivity infrastructure all share these characteristics.
For institutional allocators reviewing their PE manager universe, the HALO rotation has a direct implication for manager selection and due diligence. A PE fund with a track record built primarily on software and application-layer technology deals is operating with an underwriting methodology that requires significant recalibration for the AI-native environment. The key due diligence questions for 2026 are: how has the manager adjusted their software underwriting approach, what proportion of the portfolio is exposed to AI-disruption risk, and what is the pipeline composition for new investments relative to the HALO categories that are currently attracting the strongest LP demand?
Capital concentration and the secondaries opportunity
The concentration of LP capital around the largest established platforms continues to accelerate, consistent with the broader trend visible in hedge fund flows. The largest funds are receiving a disproportionate share of commitments as LPs prioritise established relationships, operational scale and track records that can be verified across multiple cycles. Mid-market managers face a more difficult fundraising environment regardless of investment performance.
The secondaries market is a direct beneficiary of this dynamic. Sponsors are increasingly using continuation vehicles, GP-led secondaries and structured transactions to manage liquidity and provide DPI to investors who have been waiting for exits that the IPO market has not yet fully delivered. Ropes & Gray describes the exit market as improving but not fully reopened - more pathways exist than before, but selectivity and deal structuring sophistication are required.
What this means for allocators evaluating PE managers in 2026
- Strategy label due diligence is insufficient. A "buyout" or "growth equity" label tells you little about whether a manager has repositioned toward HALO assets or remains heavily weighted toward software categories that are being recalibrated. The analytical work required is at the portfolio company level - understanding sector concentration, AI disruption exposure and the operational value creation thesis for each holding.
- Vintage year analysis matters more than ever. Portfolios constructed in 2019-2022 at peak software multiples are maturing slowly in an environment where exit multiples and revenue growth assumptions have been revised. Understanding the vintage year composition of any manager's current portfolio, and the distribution timeline assumptions attached to it, is essential to assessing near-term DPI expectations.
- Secondaries deserve formal portfolio allocation consideration. As GP-led secondaries and continuation vehicles become more prevalent, the secondaries market is providing institutional LPs with a way to access PE exposure at a discount to NAV with shorter duration than primary fund commitments. For allocators who are over-allocated to illiquid PE but under-distributed, secondaries offer a route to rebalance and redeploy into the current HALO opportunity set.
- Due diligence scope must expand to include AI governance. For any PE fund that uses AI in deal sourcing, underwriting, or portfolio monitoring, the operational due diligence process needs to include questions about model governance, data provenance, and the controls around AI-generated outputs influencing investment decisions - exactly the categories that are now being asked in LP ODD interviews.
AlternativeSoft provides institutional allocators with the PE performance benchmarking tools, vintage year analysis, IRR/TVPI/DPI metrics and integrated ODD workflow needed to conduct rigorous due diligence on PE managers across the current HALO rotation and broader market recalibration - within the same platform used for hedge fund and liquid alternatives analysis.