For an editor who just scrapes into the under-40 category, our list of private equity’s future leaders is a humbling read. A 32-year-old who leads cutting-edge transactions for a world-leading institutional investor. A 36-year-old who is head of fund investments for a €163 billion government-backed investor. This 35-year-old has deployed $2.5 billion on behalf of New York’s pensioners.

Aside from a dose of humility, one also gets a sense that this cohort is tasked with ensuring the industry stays relevant for the next generation.

So what are the unique challenges that today’s thirty-somethings face, that the Kravises, Cohens and Blacks did not? A panel of our Future 40 members offers some thoughts – ranging from political risk to a lack of diversity – here.

To theirs, I would add the following: getting comfortable with lower returns.

As Allan Emkin, managing principal at Meketa Investment Group, told us last week, investors in private equity are resigning themselves to ever dwindling returns. 30 years ago the expectation was that private equity would outperform public markets by 500 basis points. We then got used to 300 basis points and now “clients are talking about returns of 150-200 basis points over public markets.” For a visual representation of this trend, look at any of our Performance Watch charts of the leading firms’ track records (our most recently updated is Advent International).

As returns diminish our Future 40 must expect limited partners’ focus on alignment with general partners to grow more intense. Rampant demand for PE exposure keeps headline fees high for now (and is even seeing carried interest being cranked up in certain quarters), but investors are looking at ways of working around this. Co-investment is probably the biggest work-around; read about how Teacher Retirement System of Texas is growing its programme on the back of co-investment outperformance here. Elsewhere LPs are thinking about how they collaborate more effectively with each other as asset owners on investments and how they participate more directly in the GP’s economics.

As a millennial (albeit an old one) it is tempting to look back at the baby boomer generation with envy: the latter amassed wealth and property (and final salary pensions) on the back of prolonged economic expansion. Millennial private equity investors trying to build a track record in the modern era could also be forgiven a bout of inter-generational envy at GPs who were able to make a 3.6 gross multiple of invested capital on a $1.5 billion fund.

But the next generation need not be consumed by gloom. Two emerging trends in private equity investing present opportunities for those making their names today.

First is the efficiency that will come from advances in technology. The industry has barely got started in this regard: process automation will make GP operations leaner, but the scope to bring artificial intelligence to bear on deal sourcing and due diligence could change everything. Today’s emerging firms will be able to scale more rapidly than their predecessors.

Second is purpose. The emergence of impact investing – a term which is starting to become more clearly defined – represents an enormous opportunity for those with the will and the nous to effectively align positive externalities with financial returns.

The future may be a place where returns are harder to generate. But it is bright nonetheless.

Write to the author: toby.m@peimedia.com