StepStone Private Equity 2025 Market Outlook

The private equity market is evolving, with new opportunities emerging even amid macroeconomic uncertainties. Our 2025 private equity market outlook highlights key trends shaping the private equity landscape and offers insights on how investors can capitalize on these shifts.

What to expect in 2025

Key trends:

• M&A and IPO recovery: Stabilizing interest rates and improved debt markets are driving renewed deal activity, with narrowing valuation gaps improving exit conditions. This creates some optimism for 2025 exit conditions.
• Liquidity: LPs are increasingly turning to co-investments and secondaries to optimize liquidity, reduce fees and manage potential J-curve effects.
• Disciplined returns: Returns will be driven by more selective investments and focused value-creation efforts. Private equity stands to outperform in a more capital-constrained environment.
• Access for LPs: Both seasoned and newer LPs are finding diverse ways to access private equity, including co-investment, secondaries, direct investments and evergreen structures.

Our key points

Fundraising: The environment will continue to be challenging without more exits, and there may be an increased focus on small to mid-market GPs for greater diversification and exit flexibility.

• More GPs are seeking co-investment capital to bridge longer fundraising cycles.
• LPs have more time to assess portfolios, strengthen GP relationships and align on fund strategies.

Deployment and distribution: Credit availability and better debt terms are expected to drive increased deal activity.

• A larger pool of mature deals is nearing exit, with sellers eager to generate liquidity.
• A healthier post-election public market could encourage larger-cap IPOs.

Valuations: Companies with strong market positions, pricing power or growth potential will likely perform well this year.

• Businesses that have grown into their 2021 valuations with improved earnings are better positioned for exits in 2025.

The bottom line: 2025 presents opportunities in small- to mid-market deals and sectors with strong resilience.

• We expect to see a focus on organic growth, operational improvements, and strategic M&A, with co-investments and secondaries offering efficient ways to enhance returns.