Looking Toward 2027: Where We See Opportunity in Private Equity and Private Credit

At the start of 2026, much of the market expected a year of falling interest rates, a recovery in deal activity, and steady growth in private credit. The year turned out to be more complicated. Inflation proved stubborn, and the Federal Reserve has spent recent months holding rates steady rather than cutting further. AI moved from an opportunity to a risk that investors had to assess in every software and services business. Private credit faced its first broad test, with redemption pressure in some funds and closer scrutiny of what lenders had underwritten. As we look toward 2027, those forces shape where we expect to find the best opportunities.

Higher rates reward real cash flow

If borrowing costs stay near current levels, the gap between businesses that generate cash and businesses that depend on cheap financing will keep widening. That favors the kind of companies we prefer: established, profitable businesses in essential industries with sensible leverage. It also means returns in 2027 will come mainly from improving businesses, not from rising valuations or financial engineering. We think that is a healthier environment for operators and for disciplined investors.

Succession remains the largest source of opportunity

A generation of founders across healthcare, business services, and manufacturing is approaching retirement, and many do not have a clear successor. That creates a steady flow of well-run businesses that need new ownership, professional management, and capital. These transitions do not depend on the economic cycle, and the owners making these decisions care about more than price. They want a partner who will protect what they built. We expect founder transitions to be our most consistent source of private equity opportunity in 2027.

AI separates the leaders from the rest

In 2027 we expect AI to move from experiment to standard practice in the back offices of essential businesses: revenue cycle, scheduling, documentation, customer service, and finance. Companies that adopt it well will lower their cost to serve customers and grow without adding headcount at the same pace. Those that do not will face competitors able to offer the same service for less. For us, that means two things. We will keep looking for businesses where AI can improve operations under new ownership, and we will be careful with any company whose value depends on work that software can now do.

Healthcare navigates policy change

Healthcare will spend 2027 adjusting to Medicaid work requirements and more frequent eligibility checks, along with continued pressure on reimbursement. We remain constructive on businesses with commercial and Medicare payer mixes, on ambulatory and outpatient care that benefits from the long-term shift away from hospitals, and on companies that help providers verify coverage and get paid. We will be more selective with businesses that depend heavily on the populations most affected by the Medicaid changes.

Private credit gets more selective, and better

After the stress of 2026, we expect lenders to be more selective, documentation to tighten, and pricing to reflect risk more accurately. That is good news for disciplined lenders. We see particular opportunity in financing founder-owned companies that the largest lenders tend to overlook, in asset-based structures for manufacturers and services businesses with tangible collateral, and in flexible junior and structured capital for owners who want to fund growth or acquisitions without giving up control.

What we are cautious about

We are cautious about businesses whose plans assume rates will fall quickly, sectors where AI can replace the core product, platforms that grow by acquisition faster than their systems can integrate, and any investment that only works if valuations rise. We would rather move carefully and own fewer, better businesses.

The Kiron take

2027 looks like a year that will reward fundamentals: cash flow, operational improvement, sensible structures, and an honest view of how technology is changing each industry. Those have always been the basis of how we invest. Across private equity and private credit, in healthcare, technology, business services, and manufacturing, we will stay focused on businesses that are essential to their customers and on owners who want a partner that has built and run companies of its own.