It’s likely safe to say that the 2025 private equity market has performed in line with previous analyst expectations.
When the 2024 P\presidential election came to a close, many within the private equity industry were hoping the new administration could create more favorable conditions for deal-making. The Trump administration’s plans to ease regulations and create a more market-friendly environment seemed to set the stage for a significant private equity rally for the new year.
That said, the year started off relatively well for private equity investors. A report from Ernst & Young showed that Q1 2025 global private equity acquisitions amounted to about $185 billion in value. These results more than doubled last year’s findings, which only saw roughly $88 billion in value. Beyond value, Q1 2025 saw a 45% increase in dealmaking volume compared to that of Q1 2024.
Despite all this good news, investors and experts alike were beginning to express trepidation about current and upcoming headwinds. Whipsawing tariff threats, uncertain macro conditions, and looming recession risks were beginning to make private equity an increasingly difficult sell.
Buffeted by Uncertainty
Recently, Bain & Company released a report highlighting the midyear state of play for private equity investing. The notes that April’s escalating tariffs played a crucial factor in undermining global capital enthusiasm.
It may still be too early to understand the full scope of what 2025 will entail for private equity strategies. However, April proved itself to be a rough month for the private equity sector. Bain & Company points out that the value of deals that were announced in April was down nearly a quarter below the Q1 2025 monthly average. Additionally, overall deal count was down 22% compared to Q1 2025’s monthly average.
These troubling numbers extended to the exit outlook for April. As the report notes, buyout exit value has dipped about $14 billion below where things stood for Q1 2025.
With all of this in mind, how should advisors be approaching their private equity strategies? Is it time to play defensively, or are there still opportunities to be had within the private equity market?
It’s important to remember that a sizable chunk of global market volatility is being fueled by uncertainty. Certainly, many macro factors can shape deal-making, but much of the trepidation in the market is being driven by tariff implication concerns.
Forging a Path Forward
These factors and worries are certainly valid, but as the Bain & Company report notes, “there’s nothing fundamentally broken in the market.” Disciplined private equity firms with a long-term time horizon can access compelling opportunities within the global market. The firm adds that there is about $1.2 trillion in uncommitted capital within the private equity industry. This astounding amount of capital is still waiting to be deployed toward the right kind of investments.
“Whatever switchback turns lie ahead, PE firms must excel at creative dealmaking, due diligence, and value creation to make the most of the opportunities that will flow out of today’s uncertainty,” Bain & Company added. “That doesn’t mean just pinpointing the short-term effects of tariffs on a company’s demand, competitiveness, and margins. With little prospect of the world returning to its pre-April 2 certainties, even if recent tariffs remain fully or partially rolled back, tomorrow’s winners will be those that can also gauge the long-term ability of companies to adjust to a new, post-globalized era.”
Even amid bouts of volatility, private equity can help advisors build a more balanced portfolio. Traditionally, private equity can offer significant long-term growth potential, helping portfolios ignore near-term chaos, and focus on fostering capital appreciation. Additionally, private equity exposure could bolster portfolio diversification and help create a more balanced risk profile.
Even amid all this volatility, it could prove highly worthwhile for advisors to remain engaged with private equity. However, as Bain & Company notes, it remains more important than ever to choose to engage with firms prepared to home in on compelling long-term opportunities.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our podcasts.
Read more commentaries by VettaFi
