In an investment landscape often dominated by mega-funds and headline-grabbing buyouts, the mid-market and lower-middle-market segments of private equity are quietly outperforming their larger counterparts.
WTW analysis reveals that funds with less than $5 billion in assets under management (AUM) have consistently delivered stronger returns, both in IRR (internal rate of return) and TVPI terms (total value to paid-in capital), across multiple vintage periods.[1] Smaller businesses, which are typically the target of middle market funds, generally exhibit less reliance on leverage than larger comparisons- with returns driven more by margin expansion and EBITDA growth. As investors grapple with the prospect of higher for longer interest rates, a policy lever likely to particularly challenge leverage-heavy strategies, the fundamentals focused mid-market emerges as a resilient and attractive long-term investment strategy.
Below, we present our analysis across these points and more, with the aim of highlighting why at WTW we believe the mid-market and lower-mid market presents the most compelling investment opportunities for private equity capital.
Because of the large amount of capital chasing a limited number of these larger deals, bid competition among large buyout funds is intense. As a result, pricing multiples are observed to ramp materially as the deal sizes increase:
So, how do we do it?
Our philosophy
For the reasons outlined above, WTW has centred its investment thesis around the middle and lower middle-market opportunity set.
As highlighted in the analysis above, the middle market opportunity offers depth and attractive return potential, albeit with broader dispersion. To ensure we position investors on the correct side of the return dispersion story, we adopt a measured and highly selective approach when constructing private equity portfolios. Maintaining a high-bar of investment criteria through a rigorous due diligence process results in our best-ideas portfolio of top-tier middle and lower-mid-market private equity managers diversified by theme, vintage and strategy.
It is important to take note of the inherent risk in investing in private market asset classes, including private equity , which traditionally sits higher on the risk/return spectrum. Investors should ensure they understand the unique risks, liquidity, fees and access considerations etc. when contemplating making an investment within private equity and other illiquid assets. The range of investment outcomes and spread across markets is also covered in the box and whisker plots throughout this analysis. Past performance is not a guarantee of future returns.
When comparing our model portfolio (denoted in magenta) as a single data point across all four market size segments, we are competitive with or superior to median mid-cap funds (in IRR and TVPI terms), highlighting our expertise in successful manager and fund selection:
If you would like to hear more about how we construct high-performing and diversified private equity portfolios within the middle and lower-mid-market segments, please contact us for more information.
Footnotes
- WTW Private Equity Analysis, Fund Size Performance Comparison, October 2025, Return to article
- WTW Manager Research, 2024. Return to article
- Preqin as of September 2025. Including all completed U.S. and European buyout transactions within closed-end private equity funds. Return to article
Disclaimer
This document was prepared for general information purposes only and should not be considered a substitute for specific professional advice. In particular, its contents are not intended by WTW to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. As such, this document should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice.
This document is based on information available to WTW at the date of issue, and takes no account of subsequent developments. In addition, past performance is not indicative of future results. In producing this document WTW has relied upon the accuracy and completeness of certain data and information obtained from third parties. This document may not be reproduced or distributed to any other party, whether in whole or in part, without WTW’s prior written permission, except as may be required by law. In the absence of its express written permission to the contrary, WTW and its affiliates and their respective directors, officers and employees accept no responsibility and will not be liable for any consequences howsoever arising from any use of or reliance on the contents of this document including any opinions expressed herein.
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