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2025 private equity trends

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5 minute read 02 Dec 2024

Six themes will shape the private equity landscape in 2025.

In brief
  • New trends influencing private equity in 2025 include sovereign wealth funds and change management.
  • 2024 trends have evolved and will continue impacting private equity in new ways.
  • Growth continues to be a central theme and is being realized through diligence, operations and reporting.

The private equity (PE) industry is at a pivotal moment, reassessing its strategies and traditional approaches and discovering innovative ways to generate returns. Last year, we identified five trends that would shape the PE landscape: artificial intelligence (AI), infrastructure, value creation, working capital and retail market expansion. As we look ahead to 2025, some of these trends continue with a refined focus, while new themes have emerged to shape the future of the PE landscape. The six trends are:

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1. Infrastructure

PE will continue its investments in infrastructure across sectors, particularly in the energy and digital infrastructure spaces. The massive expansion of AI and other advanced technologies is requiring equally massive investment in data centers, and PE investment is at the center of navigating this growth. Over the last three years, PE firms have invested more than US$100b in data center projects. Opportunities will exist across the value chain – from data centers themselves, to the software and hardware vendors that enable them, to the enormous amounts of power needed to run them. Data centers account for more than 2% of global electricity usage today and are expected to account for 3% to 4% by the end of the decade.1 Opportunities will exist in both traditional and renewable power sources.

 

2. Artificial intelligence

AI was No. 1 on our list last year and we’re putting it in the No. 2 spot for 2025. The difference? PE’s use of AI is more focused now. 2024 was a year of exploration and discussion about how to best harness the power of AI. Now, PE firms have actual use cases that they are implementing. In the origination and diligence phases, firms are using AI-driven tools to classify, index and validate the vast amounts of documentation associated with transactions, cutting processing costs by up to 70%. During the investment period, funds and their operating teams are deploying AI to enhance productivity and growth, especially with respect to amplifying the power of their employees – helping employees prioritize workstreams and streamline internal processes.

 

3. Growth

Nos. 3 and 4 on last year’s list were value creation and working capital. This year we are merging both trends into a single theme, growth, as firms concentrate on revenue growth to enhance their performance. How will PEs achieve growth in 2025?

  • Advanced analytics, artificial intelligence and automation will significantly enhance deal sourcing, due diligence and portfolio management by analyzing vast amounts of data to identify investment opportunities and risks.
  • Strategic offshoring, onshoring and outsourcing of non-core functions will help PE firms optimize costs and focus on high-value activities.
  • As stakeholders demand greater transparency, PE firms will implement robust reporting frameworks to provide clear insights into performance, risk management and value creation strategies.
  • Expanding service offerings to include comprehensive integration services, such as tax, compliance and operational support, will allow PEs to differentiate themselves and enhance value delivery to investors while the initial public offering (IPO) market remains a work in progress.

4. Sovereign wealth funds

The influence of sovereign wealth funds will increase in the US. As sovereign wealth funds (SWFs) increasingly seek to diversify their investments in the pursuit of higher returns and reduced risk, their influence in the US will grow. PE firms are increasingly seeking partnerships with SWFs, whose assets are estimated to reach US$18t by 2030.2 In many cases, these will take the form of cornerstone investments in commingled vehicles; in others, it will take the form of increased co-investment, with alts managers and SWFs partnering side by side to invest in larger transactions. In some cases, firms will set up separately managed accounts dedicated to specific opportunity sets and the tailored risk exposure of sovereign investors. And increasingly, sovereigns will invest directly in attractive assets with compelling long-term secular trends. Year to date, sovereign wealth funds have invested nearly US$30b in PE deals for US companies, taking their cumulative deployment since 2018 to more than US$367b.

5. Definition of capital

In 2025, PE firms will continue to stretch the definition of private equity. Private markets play a crucial role in the economy by providing essential capital to innovative, emerging and middle-market companies that struggle to secure financing through public equity, debt markets or traditional bank lending. The scaling back of traditional lending created a financing gap that PE firms will continue to optimize to meet the economy’s demands. By de-leveraging the banking sector and lowering systemic risk, PE firms can offer capital solutions to industries reliant on leverage and financing, deploying the enormous amount of dry powder they have at hand while also de-risking their own holdings by diversifying. Already, private credit funds have amassed US$1.5t in assets under management (AUM), a figure expected to grow to nearly US$3t over the next five years.3 As more capital enters the market, increased competition is bringing down the cost of capital for borrowers, making it easier to access much-needed funding. And in some instances, PE firms and traditional lenders are creating new partnerships, bringing the best capabilities of both to bear to finance a broad array of companies’ use cases.

Additionally, to broaden their investor base (such as through retail market expansion, which was No. 5 on our 2024 trends list), PE firms are experimenting with new fund structures that offer the potential for increased liquidity, flexibility and accessibility. For example, semi-liquid funds offer liquidity sleeves to allow for regular entry and exits that can happen on a monthly or quarterly basis, making them viable for an array of non-institutional investors.

6. Change management

Rounding out our 2025 list is the importance of change management at all levels of the private equity landscape. PE firms are managing larger and more diverse investments, prompting a transformation of back-office systems that cannot be effectively achieved without a people-centric approach to change management. Additionally, as investors become more actively involved and the focus on outsized returns intensifies, there is an increasing emphasis on collaboration between deal executives and operating partners to facilitate the effective execution of the deal thesis. Finally, culture is emerging as a significant growth lever within portfolio companies. PEs are beginning to focus more on targeted interventions for employee groups that need it and providing learning where necessary; rewards are distributed appropriately; and sustainable long-term value is created for all stakeholders.

Having already accelerated 135% since the beginning of the COVID-19 pandemic, PE AUM are forecast to increase to US$8t by 2028.4 PE firms are leveraging their entrepreneurial capabilities to continuously evolve, underwrite global economic growth and create lasting value for investors.


Summary

Six trends are emerging that will continue evolving the private equity landscape in 2025. New themes such as sovereign wealth funds, the expansion into new markets, and change management are coupled with returning trends of AI, infrastructure and growth, which take new shape this year.

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Private equity
Wealth and asset management
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