Welcome to this week’s edition of The Private Capital Compass, brought to you by Private Capital Global (PCG), a Sparc Group company. 

This edition examines the evolving private market landscape, highlighting the resilience of private credit, growing opportunities across private equity and real assets, and the increasingly pivotal role of AI in driving operational value at portfolio companies. From historic private equity investments in collegiate athletics to synchronized rallies in PE stocks, this week’s coverage captures the momentum and strategic shifts shaping the industry.

This week’s deep dive spotlights AI as a key driver of value creation, exploring how portfolio companies are leveraging automation, predictive analytics, and supply chain optimization to enhance operational efficiency while managing cybersecurity, data governance, and regulatory risks. 

Compass Points

Key insights at a glance:

• KKR Highlights Resilience of Private Credit Amid 2025 Volatility: Based on a recent KKR article, 2025 tested private credit markets with headlines dominated by tariffs, rates, geopolitics, and AI, yet the underlying story has been one of steady, fundamentals-driven performance. Direct lending, the largest segment of private credit, continues to offer stable returns through conservative underwriting, diversified portfolios, and senior secured structures. While isolated defaults have drawn attention, KKR emphasizes these are idiosyncratic rather than systemic, underscoring the importance of rigorous credit selection and due diligence. Asset-based finance (ABF) has emerged as a complementary growth area, providing flexible, scalable financing solutions across sectors globally, from consumer loans to capital-light corporate models. Looking ahead, KKR identifies both risks, such as elevated valuations and macroeconomic crosscurrents. and opportunities, particularly in structured alternatives, AI-driven investments, and evolving ABF markets, reinforcing the role of private credit as a resilient source of capital in uncertain times.

• J.P. Morgan Highlights Private Market Opportunities Amid AI and Structural Shifts: J.P. Morgan Asset Management suggests their 2026 Global Alternatives Outlook points to significant investment opportunities across private markets as companies stay private longer and AI-driven innovation accelerates. The report highlights robust prospects in private equity, private credit, real estate, infrastructure, transportation, timberland, and hedge funds. Private equity and private credit are expected to benefit from normalized valuations, borrower-friendly credit markets, and disciplined deal sourcing. Real assets such as industrial real estate, energy infrastructure, and timberland are poised for growth driven by supply constraints, modernization, and geopolitical shifts. Hedge funds and structured alternatives may capture differentiated returns amid elevated volatility and low correlations. 

• Turning AI Into a Value-Creation Habit for Mid-Market PE: Forbes' recent article by Nate Heeren of Riveron shares that mid-market private equity firms are increasingly leveraging AI to drive operational efficiency and portfolio performance. AI applications from cash-flow forecasting and KPI normalization to fraud detection and inventory optimization are helping portfolio companies gain visibility and speed while addressing resource constraints. Heeren emphasizes the importance of building a stable data foundation, strategically choosing between building in-house capabilities and acquiring AI-enabled companies, and implementing robust governance and risk controls. For mid-market firms, success with AI hinges on disciplined prioritization, measurable results, and integrating the technology into daily operations, transforming it from a one-off project into a continuous, scalable value-creation capability.

• Goldman CFO Expects Surge in M&A Activity in 2026: Goldman Sachs’ CFO believes the private equity sector is entering a period of accelerated deal-making after a prolonged pause, as highlighted by the firm’s CFO. Improved financing conditions, a backlog of companies seeking exits, and renewed investor confidence are combining to create a favorable environment for transactions across sectors. The CFO emphasized that private equity firms are now positioned to deploy capital more aggressively, with platform acquisitions, add-ons, and growth investments expected to drive a meaningful uptick in deal volume. This momentum underscores the resilience of private markets and the growing influence of private equity, as companies remain private longer, capturing early-stage innovation and structuring flexible, long-term value-creation strategies.

• Private-Equity Stocks Surge on Anticipation of Fed Rate Cut: As highlighted by Benzinga, major private-equity firms saw a coordinated rally as investors anticipated a Federal Reserve rate cut and a renewed surge in M&A activity. KKR, Apollo, Blackstone, and Ares all posted strong gains, reflecting renewed confidence in alternative-asset strategies. JPMorgan Asset Management highlighted “public-private convergence,” noting that innovation is increasingly occurring in private markets. With companies staying private longer and private markets now approaching $20 trillion in value, public investors are seeking exposure through private-equity vehicles to capture early-stage, innovation-driven returns. The surge in PE stocks underscores a broader trend of private markets exerting growing influence on overall investment performance and market dynamics.

Deal Spotlight: University of Utah Partners with Private Equity to Launch Utah Brands & Entertainment

Transaction: The University of Utah has made history as the first college athletic department to accept private equity investment with the creation of Utah Brands & Entertainment LLC. The new entity, owned by the University of Utah Foundation, will consolidate select revenue-generating operations within the athletic department. Private equity firm Otro Capital, known for its operational expertise in sports, entertainment, and media, has partnered with the university to support the venture’s long-term growth. Notably, the university retains complete operational control, with decisions regarding athletics and operations remaining with the Athletic Director and university leadership. The initiative is expected to generate at least $500 million in capital, providing the university with resources to offset rising costs associated with student-athlete compensation and other operational pressures.

Why It Matters: This transaction signals a shift in how collegiate athletics are financed. Increasing costs related to student-athlete compensation, driven by name, image, and likeness (NIL) rules and transfer portal dynamics, have made traditional funding models increasingly unsustainable. By partnering with private equity, the University of Utah has created a model that balances external capital with internal control, mitigating the risk of ceding operational decision-making while unlocking significant financial resources.

The deal also reflects broader trends in private capital exploring new asset classes beyond traditional corporate platforms. While colleges have historically been cautious, citing regulatory, reputational, and governance concerns. Utah’s move may pave the way for similar transactions across NCAA programs. Notably, Big Ten schools have been exploring private equity partnerships, though negotiations were previously delayed due to structural and competitive concerns. The Utah transaction is likely to accelerate these discussions, creating a competitive dynamic in which peer institutions may feel pressure to leverage private capital to maintain their athletic programs' competitiveness.

Deep Dive: AI’s Role in Driving Portfolio Performance

Artificial intelligence (AI) continues to reshape operational strategies across private capital portfolios, offering both unprecedented opportunities for value creation and complex risk management challenges. As private equity, venture, and growth investors look to maximize operational efficiency and long-term returns, understanding how AI can be strategically deployed and the risks it introduces is essential.

Operational Efficiency and Productivity Gains

AI’s most immediate impact is on operational efficiency. Across industries, portfolio companies are using AI to streamline processes, enhance decision-making, and optimize resource allocation. Examples include:

• Digital Enablement of Core Operations: AI-driven automation can significantly reduce manual, repetitive tasks, allowing employees to focus on strategic initiatives. Robotic process automation (RPA) has become commonplace in finance, procurement, and HR functions, accelerating workflows while minimizing human error.

• Predictive Analytics for Commercial Excellence: AI models help portfolio companies anticipate customer behavior, optimize pricing strategies, and refine marketing segmentation. These insights enable operators to make more informed decisions that directly impact top-line growth.

• Supply Chain Optimization: Machine learning algorithms can forecast demand fluctuations, identify bottlenecks, and optimize inventory levels. For companies in the industrial, retail, and healthcare sectors, this translates into lower costs, improved service levels, and enhanced resilience.

• Enhanced Talent and Leadership Management: AI-enabled tools provide insights into workforce productivity, attrition risk, and leadership effectiveness, helping operators implement scalable talent strategies that evolve with longer hold periods.

Strategic Risks and Cybersecurity Considerations

Despite its potential, AI adoption carries significant risks, particularly in cybersecurity, data privacy, and operational reliability. As portfolio companies expand AI deployment, private capital executives must consider:

• Cybersecurity Threats: AI systems often rely on large datasets and interconnected digital infrastructure, which can become targets for cyberattacks. Data breaches, ransomware, and model manipulation are tangible threats that could disrupt operations or compromise sensitive information.

• Data Quality and Bias: Poor-quality or biased data can lead to flawed AI predictions, undermining commercial decisions and operational efficiency. Portfolio companies must establish rigorous data governance frameworks to maintain accuracy and fairness.

• Regulatory and Compliance Exposure: AI applications in healthcare, finance, and other regulated sectors require careful adherence to evolving rules, particularly around transparency, explainability, and privacy protections.

Mitigation Strategies

Private capital operators are increasingly implementing structured approaches to mitigate AI-related risks:

• Robust Cybersecurity Infrastructure: Multi-layered security protocols, encryption, and AI-based threat detection tools reduce the likelihood of breaches. Regular audits and penetration testing further strengthen defenses.

• Governance and Oversight: Dedicated AI governance committees, cross-functional review boards, and continuous monitoring of AI outputs ensure alignment with operational goals and regulatory requirements.

• Ethical and Transparent AI Practices: By documenting model assumptions, maintaining traceable data lineage, and adopting bias-detection tools, companies can maintain ethical standards and regulatory compliance.

• Talent and Training: Upskilling teams in AI literacy and risk management ensures that operators understand both the capabilities and limitations of AI technologies.

As the private capital landscape enters 2026, executives face a market defined by cautious optimism and selective risk-taking. PitchBook’s PE sentiment survey shows a delicate balance: 43% of respondents signal growing risk appetite, while 46% remain neutral. Technology sits at the center of both potential upside and risk, reflecting uncertainty around AI-driven disruption. For private capital leaders, positioning for success requires a disciplined focus on three strategic priorities.

• Build Compounding Value Creation Capabilities. With nearly two-thirds of portfolio inventory in the 4-to-15-year range, operational excellence must be continuous and scalable. Prioritize digital enablement, AI-driven productivity, commercial strategy, supply chain optimization, and leadership systems that evolve with longer holds. Quick, one-off margin improvements are no longer sufficient.

• Deploy Capital Selectively but Aggressively. Platform buyouts are returning, but discipline is essential. Leverage improving financing conditions to target high-quality platforms in tech, industrial software, healthcare services, and energy transition. Underwrite conservatively, assume longer holds, and focus on operational levers rather than market timing to drive returns.

• Align Growth Plans With Sponsor Capital Strength. Large, global GPs can lean into add-ons, tech investments, and go-to-market acceleration. Emerging or capital-constrained managers should prioritize capital-efficient growth, EBITDA expansion, and cash conversion.

Thank you for joining us for this week’s edition of The Private Capital Compass. As we look toward 2026, we’re energized by the momentum building across the Private Capital Global community and the events ahead in Austin, Boston, Chicago, London, New York, and San Francisco.

For deeper perspectives throughout the year, be sure to subscribe to The Private Capital Insiders Podcast, hosted by our President & CEO, Frank Scarpelli, where leading dealmakers and operators share firsthand insights on today’s evolving private capital landscape.

Our commitment remains unchanged: to keep you informed, connected, and equipped with the analysis and intelligence you need to convert market insight into actionable value across your investments and portfolio companies.

Opening & Closing Remarks from Erik Boender, Vice President & COO, Private Capital Global (a Sparc Group company)