Private equity can be a return-enhancer in portfolios, but some strategies have greater potential to unlock value than others. In particular, as shown on the left chart, private equity firms that use value-creation teams can boost returns. While traditional private equity strategies have often focused on financial engineering, increasingly value-creation teams are tasked with improving the underlying business models of the portfolio companies through cost reduction and top-line growth. According to McKinsey, those funds that employed value creation teams saw better returns and had more success fundraising during the crisis period than their peers. 

Still, access to financing is critical for private equity firms, which was challenging after the financial crisis. However, as shown in the right chart, private equity firms were already sitting on a tremendous amount of dry powder coming into this downturn, which coupled with the evolution of the private credit space, suggests that financing is far more readily available. Incredible support from the Federal Reserve has also more broadly prevented credit markets from freezing up this time around.