- Private equity is buying stakes in private companies (often via leveraged buyouts) to improve them and sell later for a profit.
- The market rebounded in 2025 with higher deal value and larger buyouts, increasingly financed by private credit rather than banks.
- Access for individuals is growing through private-wealth channels and newer semi-liquid vehicles, but most options remain limited to accredited investors.
- Key trade-offs are high fees and long lockups with uncertain exits, alongside rising regulatory scrutiny of leverage and disclosures.
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The private equity landscape as of late 2025 exhibits strong momentum. Global PE and venture capital deal value surged ~42.6% to $468.5 billion, driven by late-stage/growth rounds and middle-market transactions. Entry value (new investments into private companies or take-privates) also grew YOY. Large leveraged buyouts are pacing to surpass full-year 2024 levels due to ample dry powder and private credit availability.
Deal mix is shifting subtly: growth equity remains meaningful in many deals (22.3% of U.S. transactions in Q2 2025), but contributes a far smaller share of total deal value (~8-9%) versus buyouts which dominate value through add-ons and large take-privates. Meanwhile, private debt funds originated ~77% of LBO financing in 2024, increasing bank margins; in early 2025, that share rose to ~83% in initial LBO financing.
On the supply side, total AUM in private equity and alternative assets remains large, though McKinsey reports that while closed-end fund AUM declined slightly (~1.4%) in 2024, alternative structures (SMAs, co-investments, open or semi-open funds) are expanding the effective pool of private equity capital. Major firms like Carlyle, Blackstone, KKR report strong inflows and record levels of AUM.[news details]
Risks and structural frictions persist. Illiquidity remains high: fund life lockups (8-10 years+) constrain LP flexibility; exits lag deal entries. Fees (2% management fee, 20% carry) remain high, and non-traditional fund structures may have varying transparency or regulatory oversight. [Primary article] Macroeconomic headwinds—interest rate uncertainty, inflation, geopolitical risk—add valuation pressure. The entry valuation multiples, EV/EBITDA in some markets, have shown signs of stalling or modest decline.
Strategic implications for investors and GPs include: scale matters—firms with greater reach into private-wealth and secondaries are advantaged; specialization in sectors with strong secular tailwinds like healthcare, AI, infrastructure may outperform; fund structure innovation (e.g., semi-liquid, evergreen, continuation funds) will become more important; regulatory environment likely to scrutinize leverage, fees, disclosures more intensely; retail access could expand but must balance cost, liquidity, and transparency.
Supporting Notes
- Global PE + VC deal value in 2025 rose ~42.57% YOY to $468.51 billion.
- The U.S. and Canada accounted for ~US$300.2 billion of global PE investment in Q3 2025 across ~1,971 deals.
- Private debt funds financed ~77% of LBOs globally in 2024 and ~83% in early 2025.
- Growth equity made up 22.3% of U.S. deal count in Q2 2025 but only ~8.3% of PE deal value.
- McKinsey observed a ~1.4% drop in global PE AUM measured by traditional closed-end funds in 2024, offset by alternative capital sources (SMAs, co-investments, open/open-end vehicles).
- Carlyle reported $474 billion of assets under management in Q3 2025, up ~6% YOY, with strong inflows especially in its AlpInvest unit and global credit business.
- Illiquidity and long lockups: PE funds remain 8–10 years in duration; LPs often cannot exit before fund winds down, and selling in secondaries often at discount. [Primary article]
- Fee structures remain steep: typical 2% management fee and 20% carried interest (performance fee) above hurdle rate. [Primary article]