Value creation in private equity

From stock-pickers to the quant PE house

03 December 2025

Private equity (PE) has traditionally relied on picking the right investment to release value through business transformation post-deal.

PE returns have traditionally had a component of financial leverage, multiple arbitrage and value creation — usually considering a combination of all these factors whilst surfing a wave of low interest rates and natural market expansion.

As those factors seem to evolve and fade — base rates have normalised, dry powder tops US $1.0tn, and there is more than US $3.0tn backlog of unsold assets in the exit pipeline — it becomes clear that the industry will need to evolve into looking for more sophisticated ways of creating tangible value in ever increasingly disputed markets.

In this sector, data is power. Hedge funds turned quant a decade ago. Public-market active managers quickly followed with factor signals and alternative data. Yet most buy-out houses still prefer to trust a more traditional approach towards value creation, based on expert judgement and financial analysis.

We believe that as market tailwinds fade, operational alpha — built on stochastic modelling, outside-in signals and predictive intervention — will likely become a real source of competitive advantage and a systemic and repeatable investment edge. We believe that the next decade belongs to houses that can manufacture operational alpha – systematic EBITDA uplift, delivered quickly and at scale.

In this paper we set out a five-capability blueprint for value creation next-gen alpha and illustrate — with data and case studies — how leading General Partners (GPs) are now tilting their models to becoming the next-gen ‘quant PE house’.

The status quo won’t do

We feel that private equity is at an inflection point.

High interest rates and persistent inflation, geopolitical volatility and technological disruption mean that PE firms are no longer getting the investment returns they need from financial leverage and multiple expansion alone.

Value creation in private equity

From stock-pickers to the quant PE house

Value creation in private equity

From stock-pickers to the quant PE house

Generating alpha in today’s investment environment is expected to make PE firms thoughtfully re-examine and modernise their approach to value creation. A new playbook is emerging — one that emphasises discipline, innovation, and operational excellence.

Javier Rodriguez
Global Head of Strategy
KPMG International

Five key capabilities for achieving operational alpha

Generating operational alpha in this new reality requires PE firms to take a more sophisticated and scientific approach to value creation. Based on our analysis and extensive interviews with market participants, this report explores the five key capabilities that the leading PE value creators exhibit.

Balancing performance and resilience

The current market environment calls for enhanced decision making based on advanced predictive capabilities underpinned by big data and emerging technologies like machine learning and generative AI (Gen AI).

Outside-in intelligence

Systematically mining external signals can help firms gain asymmetric advantages while also enabling them to identify risks and potential value creation opportunities should the deal proceed.

Predictive interventions

With investment hold periods extending and geopolitical volatility rising, PE firms will likely need to speed up their intervention strategies.

Proprietary data assets

Centralising data across the portfolio and sharing best practises allows value creation teams to uncover opportunities previously invisible to deal teams.

Operating model overhaul

In today’s competitive market, focusing on operational improvements can be crucial to achieving higher returns.

Operational alpha is now the price of admission

Funds that institutionalise scenario simulation, outside-in intelligence, predictive analytics, proprietary data and functional operating models will out-earn the stock pickers — and raise the next wave of Limited Partner (LP) capital. Contact your local KPMG member firm to learn more.