A new generation of private equity emerging managers is injecting dynamism into the industry, benefiting everyone, including the large, established players many of them leave behind.
Today’s successful emerging managers increasingly share three traits: deep, provable expertise in a specific sector; a reputation built over a decade or two at a firm that limited partners already trust; and an unyielding lifelong entrepreneurial itch. Those managers are having an outsized impact on the industry.
Departures from larger firms continue to grow. Russell Reynolds, a global executive search firm, reported that 321 partners and managing directors left major U.S. private equity firms between 2020 and 2025. About one-third of these departures led to new investment vehicles, mirroring spinout activity after the 2008 financial crisis.
The driving forces behind these moves are generational, structural, and economic. Emerging managers are at a point in their careers where they can take calculated risks to build their own firms, teams, and cultures from scratch. With the autonomy to focus on a specialized, thematic investment playbook, emerging managers are capitalizing on a massive generational wealth transfer to identify family-owned businesses that have never had institutional capital.
Emerging managers are winning deals because they can present themselves as hungry, entrepreneurial partners who will preserve a company’s heritage while giving it the modern technological tools plus capital to grow. This agility lets them move quickly on unconventional or overlooked businesses.
These successful emerging managers are having a major impact on the private equity industry. Here is how:
- They are broadening the range of deals. These managers hunt where the deals are. Measured by transaction count rather than dollar value, most U.S. buyouts occur in the middle market and below — exactly where new funds deploy their first capital. They often do the unglamorous, value-creating work of institutionalizing founder-owned businesses. They professionalize management, build systems, and make the first add-on acquisitions. Every emerging manager writing a $50 to $200 million equity check expands the industry’s engagement with companies the largest funds cannot efficiently reach.
- The most credentialed newcomers are delivering performance. StepStone’s research found that first- and second-time funds beat the median return about 60% of the time — debut funds are the strongest of all. Top-decile emerging buyout funds from the 2015 to 2018 vintages outperformed established peers by more than six percentage points.
Concentrated portfolios, aligned economics, and founders with everything to prove form a powerful combination. And limited partners have taken notice. Allocators have broadly maintained or increased commitments to the emerging managers they already back, even as the overall pool of first-time capital has shrunk.
- They are developing the industry’s next operating models. Firms established in this decade lack legacy infrastructure. Many are building AI-native investment platforms from the ground up and hiring engineering talent directly into deal and portfolio teams. They are deploying specialized technology resources across core business functions as a fundamental strategy for value creation.
- They are becoming the pipeline for established firms. When an emerging manager buys a founder-owned business at $300 million of enterprise value and builds it into a $1 billion company, that company must be sold. Increasingly, the buyer is a mid- to large-cap sponsor.
- They are renewing the ecosystem. This concentrated wave has spawned seed vehicles that generate initial funding in exchange for GP stakes. It has also attracted established firms to back their own alumni. That web of capital, mentorship, and connections flowing to the most differentiated first-time founders is exactly the infrastructure that ensures the next generation of great firms is built faster than ever.
To be sure, emerging managers are facing a challenging fundraising environment. According to McKinsey’s Global Private Markets Report 2026, the number of new PE firms declined between 2020 and 2025, while the number of first-time buyout fundraisers who closed a fund fell by 15% per year over that time.
But those numbers fail to include independent sponsors, managers who go out on their own but do not raise funds until they secure deals. A significant number of these independent sponsors will go on to raise traditional funds. Many others will continue to raise capital on a deal-by-deal basis. There are an estimated 1,400 active independent sponsors in 2026, about double the number in 2019, according to McGuireWoods, which hosts an industry-leading conference connecting those firms with capital providers.
At Jefferies, we have made a deliberate bet on the next generation of emerging managers. We help first-time founders focus on what they cannot learn from a data room: crucial early hires, operational pitfalls, the realities of fundraising, and access to the limited partners who anchor first funds. We help them identify and source investment opportunities by leveraging our top-ranked sponsor M&A practice, finance these acquisitions with our leading direct lending franchise, and then help them realize exits through our coverage of more than 900 private equity, infrastructure, sovereign wealth fund, and family office investors.
Last year, our inaugural Emerging Managers Summit brought together 25 first- and second-time fund founders, who heard a fireside chat with Jefferies CEO Rich Handler and Steven Klinsky, founder and CEO of New Mountain Capital. Through this Summit, Jefferies has formed an informal “YPO” for emerging managers to share and learn from each other as they embark on new career paths as founders and owners.
Private equity’s future is often described as a barbell, with mega-platforms at one end, specialists at the other, and the undifferentiated middle squeezed. But that is only half the story. The other half is regeneration. Sector-specializing emerging managers, teamed with proven operators, are reshaping the industry.
The same forces pressuring the middle of the market are driving the industry’s most specialized and credentialed investors to do what its founders did forty years ago: start something new. The firms they are building today will be the franchises, sellers, buyers, and innovators of the coming decades. That is not broad-based disruption. It is concentrated dynamism. And private equity is healthier for it.
