LPs, too, appear to be shifting gears for this more technically demanding road ahead. Effective allocations to private equity declined for the first time in more than a decade, despite target making. Together, those factors are shifting LP private equity allocations. 1. Recent public-market outperformance has overshadowed muted PE returns. PE returns have not only trended downward over time; they appear to be at a historic low. Buyout fund IRRs reached a post-2002 trough between 2022 and 2025, averaging 5.7 percent on a pooled basis and ranking as the second-lowest period on a median basis at 5.4 percent (Exhibit 12). This deterioration reflects a combination of paying more (entry valuations are higher),