London, UK – The global private markets are gearing up for a significant resurgence in 2025, buoyed by an accelerating innovation supercycle, an improving liquidity landscape, and the potential for favourable policy shifts. This optimistic outlook comes from Adams Street Partners' fifth annual "2025 Global Investor Survey: Navigating Private Markets," which gathered insights from 200 limited partners (LPs) and financial advisors (FAs) across the US, Europe, and APAC.
After navigating several years of "tempestuous" conditions, marked by subdued dealmaking, exit activity, and fundraising following an "unsustainable level of exuberance" in 2021, the market is showing clear signs of recovery. A 25% rebound in global private equity and venture capital dealmaking value in 2024 indicates a cautious but growing optimism for steadily improving market conditions in the year ahead and beyond.
Investors are increasingly optimistic that a recovery in dealmaking will boost liquidity, which in turn could drive fundraising as reinvested capital increases – a positive flywheel effect. This confidence is underpinned by the strong belief among survey respondents that private markets will outperform public markets over the long term. This outperformance is attributed to factors like lower volatility, superior governance, innovation, and the inherent agility of fast-growing private companies. As Richard Turnill, Senior Bursar at Trinity College Cambridge, notes, private market valuations tend to adjust more slowly and modestly than public market equivalents, making them less susceptible to short-term volatility. Preqin forecasts that private markets could grow from $15 trillion in 2023 to nearly $30 trillion by 2033.
Key Drivers Propelling Private Market Growth:
- The Artificial Intelligence (AI) Revolution:
- AI is identified as a pivotal driver of value creation, standing at the forefront of what could be the most far-reaching technological revolution in history. The survey highlights the expectation of a proliferation of AI-leveraging startups across all economic sectors, significantly boosting labour productivity.
- Early-stage AI-native startups are attracting substantial capital, capturing almost half of the $209 billion in global venture deal value in 2024. Investment in AI and machine learning startups surged by over 50% to $131.5 billion in 2024, accounting for 35.7% of all venture dollars globally.
- Brijesh Jeevarathnam, Partner & Global Head of Fund Investments at Adams Street Partners, notes that this "combination of customer and fast-paced innovation cycle fuels venture capital investments today". Marcus Lindroos, Principal, Primary Investments, reinforces that "Venture capital is an interesting opportunity for investors to capture technological innovation".
- This AI-driven innovation supercycle, coupled with the accelerating digital transformation of the global economy, is expected to underpin growth in private markets in the year ahead.
- Favourable Policy Changes and Regulatory Environment:
- The prospect of lower interest rates, regulatory streamlining, tax adjustments, and reduced antitrust scrutiny could create a more conducive environment for private market participants.
- A potential relaxation of stringent initial public offering (IPO) application rules may also boost this crucial exit route. Global IPO volumes saw a slight increase to $123 billion in 2024.
- Under a potential US President Donald Trump administration, expectations include reduced regulation and a more lenient approach to mergers and acquisitions (M&A), which could benefit markets by boosting growth and easing compliance burdens. Jason Malinowski, CIO at SCERS, anticipates overall deal volumes in 2025 to fall between 2021 and 2023 levels, partly due to a reduction in the bid-ask spread and more realistic valuation expectations from founders.
- Pent-Up Demand and Realistic Valuations:
- A plentiful supply of capital, more realistic valuation expectations, and pent-up demand for dealmaking and liquidity are creating highly favourable conditions for private markets investors.
- US private equity managers currently hold an eight-year inventory of companies they are eager to sell. The gradual reawakening of the IPO market is a clear signal that the pent-up demand for dealmaking may be reaching a pivot point.
- Growth equity valuations have stabilised, with a renewed focus on "profitable growth" over a "growth-at-all-costs mentality," according to Brijesh Jeevarathnam.
Key Strategies and Sectors Drawing Investor Interest:
- Private Credit: This asset class has been a strong performer, with Assets Under Management (AUM) reaching a record $1.6 trillion by the end of 2023, accompanied by $520.2 billion in dry powder. Investors are drawn to its attractive relative yields, better pricing, capital structure seniority, and robust credit protections, making it a "compelling risk-return proposition". While direct lending remains a mainstay, specialty finance, opportunistic credit solutions, and Net Asset Value (NAV) lending are seeing significant growth.
- Co-investments: LPs are highly bullish on co-investments, with 88% planning to allocate up to 20% of their capital to this strategy. Valued for their favourable economics, diversification potential, and ability to foster deeper GP relationships, co-investments are seen as an increasingly vital tool for lead sponsors to complete large transactions.
- Secondary Investments: Solidifying its role as a crucial portfolio rebalancing and liquidity management tool, the secondaries market saw transaction volume rise 45% to a record $162 billion in 2024. GP-led deals, particularly continuation vehicles, are gaining traction, offering potential for outsized risk-adjusted returns. Secondary investments also offer a compelling entry point for individual investors, providing access to more mature assets with lower risk, shorter durations, and greater liquidity.
- Venture and Growth Equity: Investor enthusiasm is improving, with 26% of respondents planning to deploy more capital into venture capital this year, representing the largest increase among all strategies. Driven by AI and digital transformation, these areas continue to attract significant investment, with a renewed focus on the quality and sustainability of growth.
- Technology and Healthcare: Consistently identified by 47% of LPs as the most promising sectors for private markets investments in 2025, driven by AI-driven innovation and digital transformation.
Challenges and Geopolitical Headwinds:
Despite the optimism, investors face significant challenges. Inflation (86%), interest rates (83%), international geopolitical risks (83%), and domestic political instability (74%) are identified as top concerns for LPs. More than 80% of survey respondents expect geopolitical events to impact their investment decision-making, with US-China trade tensions (54%), the Ukraine-Russia war (53%), and US political instability (37%) being key considerations. Potential policy shifts under a US President Donald Trump administration, including higher tariffs, could be inflationary and hinder growth.
Furthermore, investor enthusiasm for environmental, social, and governance (ESG)-focused opportunities appears to be waning, with only 31% ranking it among the most attractive opportunities for 2025, down from 46% last year. This shift is partly attributed to ESG becoming politically divisive in some markets, especially parts of the US, and potential policy rollbacks concerning climate action, such as the US withdrawal from the Paris climate agreement in January 2025. However, the broader "energy transition" theme continues to influence investment decisions across various strategies.
Geographically, North America and Europe remain top investment preferences for 62% of LPs. China's appeal has declined to 11%, while interest in emerging Asia-Pacific (such as India and Southeast Asia) has risen to 38%.
A Strategic Window of Opportunity
The outlook for private markets in 2025 is decidedly more optimistic, driven by increased dealmaking and liquidity, which are expected to catalyse a rebound in fundraising across buyout, secondary, co-investment, and private credit strategies. The "unstoppable trend" of AI will continue to drive significant investment in venture and growth equity.
As private markets evolve and become more accessible, innovation in product design and new investment structures are anticipated, creating a dynamic landscape ripe with diverse opportunities for growth and value creation. Managers looking to attract new capital will need to demonstrate deep sector and subsector expertise (43%), individual portfolio manager experience (38%), advanced digital analytics and reporting (35%), and an ability to execute large and complex deals (35%). The current environment presents a strategic window of opportunity for astute investors and managers.
Read more: https://www.adamsstreetpartners.com/insights/2025-global-investor-survey/
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