2025 Global Investor Survey: Navigating Private Markets

A NOTE FROM JEFF DIEHL

Pent-Up Demand for Liquidity, Dealmaking Augurs Well for Private Markets

Turbulence is a fact of life for private markets investment managers. Indeed, it could be considered essential to the search for the innovative companies that have the potential to become future industry leaders, since disruption is seldom discovered when fishing in calm waters.

But the past few years have been more tempestuous than usual. After peaking in 2021, dealmaking, exit activity and fundraising¹ have been subdued. Frankly, 2021 was an anomaly, marked by an unsustainable level of exuberance.

But a 25% rebound in global private equity and venture capital dealmaking value in 2024² makes us cautiously optimistic that market conditions will continue to steadily improve in 2025 and beyond. In our experience, a surge in liquidity tends to follow periods of muted dealmaking and exit activity. At current exit pace, US private equity managers hold an eight-year inventory of companies that they are eager to sell.³

Artificial intelligence (AI) is likely to be a key driver of value creation. We are at the outset of perhaps the most far-reaching technological revolution in history, one that has the potential to significantly change how we work and live. As this nascent theme develops, we expect a proliferation of startups leveraging AI to solve multiple problems across every sector of the economy, materially lifting labor productivity. After capturing almost half of the $209 billion in venture deal value globally in 2024,⁴ early-stage AI-native startups should continue to attract significant capital over the next 12 months and beyond.

Policy changes could also provide stimulus, especially in the US. The prospect of lower interest rates, regulatory streamlining, tax adjustments, and reduced antitrust scrutiny may create a more conducive environment for private markets participants. A relaxation of stringent rules governing initial public offering (IPO) applications may also boost that crucial exit route.

But there is always uncertainty, which today largely revolves around sticky inflation, higher-for-longer interest rates, geopolitical risk, and trade relations — especially the use of tariffs. Investor prudence is also manifesting itself through an increasing preference to work with managers who have the capability to produce excess and repeatable alpha at portfolio companies. Gone are the days of successfully exiting a portfolio company without increasing its profitability and intrinsic value.

Overall sentiment, however, is trending positively as innovation accelerates. A plentiful supply of capital, more realistic valuation expectations, and pent-up demand for dealmaking and liquidity are creating favorable conditions for private markets investors. Additionally, a positive regulatory outlook and a robust pipeline of innovative companies in need of growth capital should present a strategic window of opportunity.

EXECUTIVE SUMMARY

Opportunity Knocks as Change Accelerates

After more than 70 countries — including the US, the UK, France, Japan, Mexico, and India — held national elections in 2024, investors of all stripes are looking for clarity on how policy changes might impact industries, trade relations, and growth.

Although the direction of monetary, fiscal, and trade policies is in transition for many major economies, uncertainty is balanced by growing optimism among private markets participants around an expected recovery in exit activity and dealmaking. Confidence in major markets such as the US is driven by an expected easing of regulatory burdens and antitrust scrutiny, along with the prospect of personal and corporate tax cuts, and by anticipation over the transformative potential of innovative technologies such as AI.

Subdued exit activity — and, consequently, lower distributions — have hampered fundraising in recent years. But investors are increasingly optimistic about a dealmaking recovery, which could boost liquidity and potentially drive fundraising as reinvested capital increases.

Responses to Adams Street Partners’ fifth annual global investor survey underscore this positive flywheel. This year, respondents included both limited partners (LPs) and — for the first time — financial advisors (FAs). Respondents expect private markets to outperform public markets over the long term, even taking into account the exceptional performance of public markets in 2023 and 2024. Factors respondents cited as influencing this belief include lower volatility, superior governance (including better alignment between shareholders and executives), innovation, and, in an increasingly digitized world, agility and adaptability. Investors believe these characteristics uniquely position fast-growing private companies to capitalize on opportunities for disruption, innovation, and transformative growth.

Both LPs and FAs identify technology and healthcare as the most promising sectors for private markets investments. However, investors’ enthusiasm for environmental, social, and governance (ESG)-focused opportunities appears to be waning as the topic becomes politically divisive in some markets, particularly parts of the US. LPs highlight inflation, high valuations, and geopolitical tensions as key challenges. They favor allocating capital to co-investments, large buyouts, and secondary markets, with a continuing focus on North America and Europe.

1. S&P Global Market Intelligence, Private equity, venture capital deal value jumps 25% in 2024, January 14, 2025; Global private equity fundraising sinks for 3rd straight year, January 16, 2025; Private equity exit value falls to 5-year low, January 15, 2025. 
2. S&P Global Market Intelligence Private equity, venture capital deal value jumps 25% in 2024, January 14, 2025. 
3. PitchBook, US PE Breakdown Q3 2024, October 8, 2024, Page 27. 
4. PitchBook and National Venture Capital Association , January 13, 2025, Pages 7-9.