This research examines the evolution of human capital from an operating cost to a strategic asset in private markets. Drawing on interviews and survey data from more than 20 leading investment firms representing nearly $4 trillion in assets, the report argues that the “people premium” is the value created when capital, technology, and strategy are matched with an organisation capable of executing them. The findings suggest that sophisticated firms are moving towards systemic models where human capital is integrated throughout the investment life cycle.

Pre-deal diligence and leadership underwriting

Human capital evaluation is evolving into a core underwriting discipline rather than a simple risk mitigation exercise. While baseline diligence focuses on compliance and workplace safety, more mature investors use it to determine investment potential. Bain Capital, for instance, evaluates prospective CEOs through psychometric testing and four-hour behavioural interviews to predict long-term success. The focus is shifting from individual executives to assessing the entire leadership team’s ability to execute a value-creation plan.

Strategic firms now treat leadership assessment as a formal requirement for deal approval. EQT integrates human capital directly into decision-making through its Industrial Advisor network of over 600 sector experts. A deal cannot pass the investment committee without memos outlining the asset’s leadership strengths and potential risks. Brookfield similarly involves its business operations team from the start of diligence, assessing three layers below the CEO to ensure middle management can sustain organizational change.

The investor platform as a human capital advantage

Post-acquisition, leading firms leverage their platform capabilities to strengthen portfolio companies. CEO and C-suite buildout is identified as the most common human capital intervention during the first 12 months of ownership. KKR established a Human Capital Center of Excellence (HCCOE) to help leadership teams track engagement and turnover as leading indicators of performance. This platform approach encourages empathetic leadership, which KKR links to higher ownership culture scores and lower voluntary attrition.

Bain Capital employs a “Team Acceleration” framework for every new portfolio company, standardising assessments across its portfolio to build longitudinal data. This shift has reportedly improved CEO selection success, moving from a “coin-flip” to ensuring 88% of CEOs meet performance standards. Brookfield treats its portfolio as a connected leadership system, piloting cross-portfolio secondments for management and mid-level employees to allow talent and knowledge to compound across investments rather than remain isolated.

The measurement challenge

While investors agree that human capital is critical, establishing robust methodologies to quantify its financial contribution remains a challenge. Most firms currently report limited longitudinal data and difficulty isolating human capital impact from other enablers. However, the industry is moving from reactive reporting to predictive management. KKR uses leading indicators like absenteeism and voluntary attrition to assess management effectiveness and evaluate its broad-based employee ownership programmes.

Evidence from Ownership Works, which has deployed 192 employee ownership programmes across 46 investors, suggests that aligning incentives across the workforce positively influences operational performance. Their data shows that 72% of participating companies improved voluntary turnover, with a median reduction of three percentage points. A case study on Integrated Specialty Coverages (ISC) showed that such initiatives led to top-decile engagement scores and a 50% reduction in voluntary attrition since 2022.

AI reshaping the human capital playbook

Artificial intelligence is shifting from a productivity tool to a driver of capability transformation. Investors are using AI to enhance diligence and automate time-intensive tasks, such as generating management interview scorecards. However, surveyed investors emphasize that leadership assessment and investment judgement remain firmly human responsibilities. AI adoption is having the most significant impact on the middle layer of the workforce, particularly in knowledge-intensive functions like legal services.

The report suggests that AI implementation must be treated as a human capital strategy. While junior and senior levels are adapting, the middle-management layer—analysts and associates—is at risk of being left behind. Mature approaches use AI to augment analysis while rethinking career pathways to ensure the talent pipeline for future leaders remains intact. Venture investors are notably designing organisations around AI-native models from inception, eliminating legacy infrastructure challenges.

Local context as a competitive advantage

Global investors are increasingly adapting their human capital playbooks to regional realities. In the Middle East, firms like Mubadala and Al-Dabbagh Group have moved away from Western DEI metrics to focus on regional social objectives, such as women’s workforce participation and the inclusion of “people of determination.” In Singapore, Temasek applies global measures for gender but calibrates ethnicity-related goals based on local demographics. This evolution marks a shift from fixed global templates to locally appropriate implementation.

Demographic shifts also reshape investment theses. In Saudi Arabia, the expanding female labour force is intensifying competition for skilled employees, while in China, a shrinking labour force is forcing a shift from low-cost labour advantages to productivity and innovation. Government policies, such as “Saudization,” make workforce planning an operational necessity. The Saudi Industrial Development Fund (SIDF) illustrates this by combining financing with executive education, attracting up to 13,000 applicants annually for its specialized training programmes.

Opportunities for further development

To accelerate the role of human capital, the report identifies four priority areas: defining characteristics of mature programmes to enable benchmarking; building common methodologies for quantifying value creation; establishing independent standards for validating outcomes at exit; and examining how AI will reshape leadership pipelines and organisational design. Addressing these areas will help establish human capital as a repeatable and measurable source of long-term enterprise value.