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
Willis Towers Watson (Ireland) Limited trading as Willis Towers Watson is regulated by the Central Bank of Ireland. Registered in Ireland number 402562
Risk warnings
- This is a marketing communication. Please refer to the fund prospectus and any other relevant documentation before making any final investment decisions.
- This material is intended for investors with long-term investment time horizons
- The value of all investments and the income from them can go down as well as up. This means you could get back less than you invested.
- Changes in exchange rates may cause the value of investments to decrease or increase.
- Past performance does not predict future returns.
- The document contains figures that refer to simulated past performance, which does not predict future returns.
- Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future.
- The securities and derivatives investment activities which the Fund engages in may be speculative and involve a substantial risk of loss.
- The fund may be exposed to credit and/or default risk of issuers of debt securities that may be held within the fund.
- The issuers of any bonds within the fund may default or not be able to pay the bond income as expected.
- If the fund is denominated in a currency other than your home currency, movements in exchange rates may, if not hedged, have a significant impact on the value of (and income from) your investment.
- Shares/units in the fund may become illiquid and investors may redeem their investments only as stated in the fund’s prospectus.
- Private markets refer to investments not traded on a public exchange or market.
- Underlying private markets investments of the fund will normally be in unlisted companies and assets whose securities are not publicly traded and are therefore likely to be illiquid. They carry substantially higher risk than many investments in the equity of larger, listed companies, their public debt securities, or in listed real assets.
- Investors should regard an investment in private markets as a long-term investment which carries higher risk than many other forms of investment.
- There is usually less transparency in place around the management of private markets investments given the lower disclosure requirements. In general, there is limited information available on the investments and performance of the underlying portfolio companies and assets, other than annual or semi-annual financial statements, or sometimes, quarterly reports.
- Such investments are more difficult to value given that they are not traded on a public exchange or market.
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