Value Creation, Continuation Vehicles and the End of Easy Multiple Expansion

Private equity’s adjustment to higher rates, the practical realities of the 2021 vintage, and the rising role of continuation vehicles and regional depth formed the core of the fourth panel at the HKMA Investment Forum in Hong Kong on 4 November 2026. Moderated by Ganen Sarvananthan, Managing Partner and Co-Head of Asia at TPG, the discussion brought together Juan Delgado-Moreira of Hamilton Lane, John Redett of Carlyle, John Connaughton of Bain Capital and Jonathan Sokoloff of Leonard Green & Partners.

Juan Delgado-Moreira opened with the broader private-markets backdrop. Hamilton Lane’s modelling indicates that the 2021 vintage will not lose money in aggregate, even if returns prove disappointing relative to earlier expectations. The system of rules and incentives continues to function. He also noted a shift among limited partners away from rigid private-market allocation caps toward more holistic portfolio construction that can include secondaries and other access points.

John Redett followed with a constructive assessment of the opportunity set. Demand for private capital remains exceptionally strong. The industry operated successfully in similar rate environments for decades; the zero-rate period was the outlier. Returns can no longer be driven primarily by multiple expansion. The focus has returned to operational value creation. Redett said he is incredibly optimistic about the opportunities over the next five to ten years. A recent European healthcare exit was completed at a lower multiple than entry but with more than doubled EBITDA. Activity is high in Japan and across Asia, while Europe continues to offer attractive industrial and carve-out opportunities at multiples that reflect lower growth expectations.

John Connaughton reinforced the capability point. Value-creation resources inside large firms have expanded dramatically. Bain Capital now fields approximately 200 dedicated value-creation professionals with vertical and functional specialisation who work inside portfolio companies. AI is viewed as a significant accelerator of this work, enabling faster and more fundamental change in go-to-market, pricing, procurement and other functions. Because private-equity firms control or influence large portfolios, they are positioned to drive behavioural and operational change that pure diffusion of technology cannot achieve alone.

Jonathan Sokoloff emphasised the enduring mathematics of the model. Growth in the underlying businesses remains the primary driver of returns. Higher entry multiples and a higher cost of capital simply require more growth or longer holds to achieve the same outcomes. He illustrated the impact of delayed exits: a sale at the current mark that would deliver a 20 per cent IRR today falls to 17 per cent after one year, 14 per cent after two years and 11 per cent after three years.

Connaughton and Sokoloff both indicated that duration for the 2021 vintage will be longer. Connaughton pushed back against the idea that longer holds automatically signal low-quality assets. Many high-quality companies were acquired during the high-volume period. The key variables are the exit multiple assumed at underwriting and the range of exit options available.

Redett expects the higher-rate environment to produce a healthy shake-out, with some firms disappearing and others merging. Connaughton added that capital is likely to concentrate around managers that possess genuine depth in value creation, sector expertise and capital-markets capabilities. Current vintages being invested under tighter discipline are expected to rank among the stronger ones of recent decades.

I think this higher rate environment is gonna be incredibly healthy for the private equity industry because you’re gonna see a shakeout.

John Redett, Carlyle

Sokoloff was blunt about the installed base. The only IRRs that are real are those realised on exit. Many marks will prove optimistic. Managers must be willing to sell at prices that are disappointing relative to prior expectations. Even so, realised prices have often still cleared existing marks. Distributions at Leonard Green have averaged around 20 per cent of NAV over the past five years, supported by two very large strategic exits, but many other sales have been harder.

Delgado-Moreira provided the most detailed commentary on continuation vehicles. The channel has grown rapidly and now accounts for nearly half of secondary volume. Assets rolling into continuation vehicles had already returned about 4x money on average. GP roll-over of carry is near 93 per cent, resulting in GP alignment close to 10 per cent. On Hamilton Lane’s analysis, these transactions have delivered returns above the top quartile of the broader universe and distributions roughly double the broader set. From an LP perspective that is willing to underwrite the governance, the profile is attractive.

Sokoloff acknowledged the controversy. Many LPs dislike continuation vehicles. Leonard Green has raised a dedicated vehicle to invest in other GPs’ continuation assets precisely because the structure can create opportunities to buy high-quality assets at a discount. The supply of candidate companies currently exceeds demand, which favours buyers with capital. The structure is not disappearing.

On geography, the panel saw complementary forces. Delgado-Moreira expects continued demand from LPs for greater choice and control over regional exposure, particularly more Asia private-market exposure, rather than the traditional 70-20-10 split. Global firms are investing heavily in local presence while also offering more granular regional access.

Connaughton argued that genuine global depth is now a requirement. Bain Capital’s Japan and Italy teams, for example, are larger than many dedicated local specialists and have been among the firm’s strongest performing markets. The ability to amortise value-creation, sector and capital-markets capabilities across a global platform is a competitive advantage in a more complex geopolitical environment.

Redett noted Carlyle’s regional-fund model (separate vehicles for Europe, the United States, Asia and Japan). Local expertise remains essential; the firm’s Japan and broader Asia teams are currently very active. The combination of global resources and local execution is particularly relevant today.

The panel did not issue direct allocation recommendations. Read together, the discussion highlights several practical realities for asset owners and their managers: operational value creation has returned to the centre of private-equity underwriting; the 2021 vintage is likely to deliver longer duration but not systemic capital loss; continuation vehicles have become a material liquidity and alignment tool whose performance data deserve careful examination; and both global capability and genuine local depth are increasingly required in a higher-rate, more fragmented world.