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Private equity in 2025: the outlook for fundraising, deals, and performance

A lack of fundraising momentum, low asset valuations, and high debt costs were some of the forces that affected private equity in 2024. However, the prospects of more rate cuts, electoral stability, and signs of a recovery in M&A are giving GPs reasons to be more optimistic for the year ahead.

Deal-making has now surpassed the total in 2023 and is up to $1.2tn so far this year, according to Preqin Pro. It is widely expected that the build-up of dry powder and the backlog of exits will begin to clear as M&A picks up in 2025.

However, slower distributions to LPs and a lack of capital recycling have caused fundraising to decline for the fourth year, with $673.7bn raised by private equity funds so far this year, down 28% from the $934.0bn total at the market’s peak in 2021.

After three years of GPs returning capital to investors between 2013 and 2015, capital called has exceeded distributions every year since 2016, to the tune of$859.7bn by the end of 2023. Data collection methodologies mean 2024 numbers are not yet available, but anecdotal evidence points to a continuation of the trend.

Falling interest rates and easing inflation will invigorate managers and should lead to an increase in exit activity and capital recycling. However, secondaries and continuation vehicles, which have risen to prominence in recent years, will remain a crucial part of the exit playbook.

Preqin News spoke with private equity managers and advisers to gather their thoughts, opinions, and predictions for fundraising, deals, and performance in 2025.

Fundraising

While the overall availability of LP capital is likely to improve, we expect fundraises to continue taking longer, given meaningful pent-up demand from GPs who have either delayed fundraises or raised smaller funds, as well as a backlog of GPs currently in the market who are waiting for allocations to re-set in 2025.

Jeffrey Stevenson, Managing Partner, VSS Capital Partners (New York, US)

At the same time as we will see continued expansion of the multi-product mega-firms, we expect to see continued growth in first-time funds. For example, first-time fund launches in 2023 were up more than 20% YoY. We are seeing strong demand for new managers with a clear ‘right to exist’, a differentiated value proposition, and a cohesive team with an attributable track record. This can become even more compelling with potentially meaningful co-investment offerings.