high - Private equity returns depend on portfolio company EBITDA growth (GDP-linked), exit multiples (sentiment-driven), and M&A activity. Recessions compress valuations, reduce exit opportunities, and impair carry generation. However, counter-cyclically, downturns create distressed credit opportunities and lower entry multiples for new PE investments. Infrastructure and real assets provide some defensiveness through contracted cash flows.

Rising rates create multiple headwinds: (1) Higher discount rates compress public market multiples, reducing marked-to-market NAV on portfolio holdings; (2) Increased debt service costs for leveraged buyouts reduce portfolio company cash flows and returns; (3) Higher financing costs make large-scale M&A less attractive, reducing exit opportunities; (4) Competition from fixed income yields makes private equity less attractive to LPs on a risk-adjusted basis. However, credit funds benefit from floating-rate loan portfolios that reprice higher. Net impact is moderately negative.

growth - Investors attracted to 15-20% AUM CAGR and operating leverage as management fees compound, with carry providing upside optionality. However, recent -27% 1-year return reflects valuation compression as rates rose and PE exit environment deteriorated. Not a dividend story (modest yield) but rather a compounder dependent on fundraising momentum and realization cycles.