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.
Strong Interest in Private Markets Commitments5
The Private Markets Boom6
What Institutional Investors are Thinking
Adams Street’s Fifth Annual Global Survey Found:
- 47% of LPs Favor Tech and Healthcare: Technology and healthcare are the top sectors, identified by 47% of respondents. AI-driven innovation and digital transformation continue to fuel interest in these areas.
- AI Drives Venture Investment Activity Reaching $209bn: AI is driving significant investment, particularly in venture capital and growth equity. In 2024, AI-native startups accounted for nearly half of global venture deal value, with total deal activity reaching $209 billion.
- North America and Europe Top Investment Preferences: Sixty-two percent of LPs say both North America and Europe offer the best investment opportunities, China’s appeal declines by five points to 11%, while interest in emerging Asia-Pacific rose to 38%, from 31%.
- Industry-Wide Private Credit AUM Surges to $1.6tr: Private credit remains one of the top-performing asset classes in private markets, with assets under management (AUM) reaching $1.6 trillion in 2023, while managers hold $520.2 billion in dry powder.
- 88% of LPs Plan to Increase Co-Investment Allocations: Co-investments can often be a cost-efficient way for LPs to gain exposure to private markets, with 88% of survey respondents planning to allocate up to 20% of capital to this strategy.
- 86% of LPs Identify Inflation as Top Investment Challenge: The greatest concerns for LPs include inflation (86%), followed by interest rates (83%), international geopolitical risks (83%), and domestic political instability (74%).
- Geopolitical Risks Increase: More than 80% of survey respondents expect geopolitical events to impact their investment decision-making. US-China trade tensions, potential policy shifts under US President Donald Trump, and global economic realignments are key considerations.
2025 Outlook
Private Markets Primed for Growth
Private markets appear poised for a rebound in 2025, driven by supportive market conditions and an expectation for accommodative monetary policies. Demand for private market strategies is robust across both institutional investors and individual investors. Two thirds of respondents to our LP survey plan to increase commitments to existing managers, mirroring levels last year, while rising interest from individual investors is reshaping product offerings from general partners (GPs) as well as their distribution strategies.
Strong Interest Across Private Markets Sub-Classes5
An ongoing innovation supercycle — propelled by AI and the accelerating digital transformation of the global economy — together with an improving outlook for dealmaking and liquidity, is expected to underpin growth in private markets in the year ahead. The rapid advance of AI-driven technologies, bringing transformative solutions to individuals, businesses, and societies, has unlocked significant investment opportunities in venture-backed companies.
An ongoing innovation supercycle — propelled by AI and the accelerating digital transformation of the global economy — together with an improving outlook for dealmaking and liquidity, is expected to underpin growth in private markets in the year ahead
As liquidity improves and a backlog of exit activity begins to clear, private markets could grow to almost $30 trillion by 2033, from $15 trillion in 2023, according to Preqin,7 with private debt and infrastructure leading the way.
Long-Term Outlook: Private Markets to Outperform
Although market volatility is seen as a top investment challenge for nearly 40% of LPs who responded to our survey, it can also represent an opportunity for long-term investors who can see beyond short-term fluctuations in value, says Richard Turnill, who, as Senior Bursar, helps to manage the endowment at Trinity College Cambridge.
“One of the concerns about private markets is that they don’t mark-to-market regularly,” he says. Private assets are less susceptible to short-term market volatility as GPs rely on valuation models to make current estimates, Mr. Turnill notes.
In line with his observation, our experience of past market cycles indicates that private market valuations tend to adjust more slowly and more modestly than their public market equivalents. Eighty-two percent of survey respondents agree that private market investments are less susceptible to short-term volatility than public markets.
Although Mr. Turnill adds that rising valuations in recent years across public and private markets may suppress returns in the short term, our survey found that 85% of LPs expect private markets to outperform public markets over the long run. Private equity is forecast by Citi Wealth to deliver 13.5% annualized returns from 2025 to 2035, with private credit returning 7.6% and real estate 11%. That compares with 5.6% for publicly traded equity and 4.8% for fixed income over the same timeframe.8
Hideaki Miyajima, Executive Vice President and Professor at Waseda University in Tokyo, stresses the importance of looking past short-term volatility and reinvesting distributions into the newest private equity vintages. ‘’Our main strategy is to consistently invest in private markets through periods of heightened market volatility,” Mr. Miyajima says. “Private equity dry powder has accumulated over the years and some areas in the asset class are congested. This only means we need to work harder to find high-quality investments through the managers we back.”
Investor Sentiment on Private Markets5
Private Credit
Private Credit: A Wider Addressable Market
Private credit has been among the strongest-performing asset classes in private markets since the start of 2021.9 As interest rates rose to tame inflation following the covid-19 pandemic, investors with access to high-quality private credit managers were capable of achieving private equity-like returns while assuming less risk.10 Private credit AUM reached a record $1.6 trillion at the end of 2023, according to PitchBook, with managers holding $520.2 billion in dry powder.11
Institutional AUM Exceeds $1.6 Trillion with $520.2 Billion in Dry Powder11
Investors have a strong preference for long-established private credit managers with a record across business cycles, according to With Intelligence, which also reports that 40% of the $209 billion in final closes in 2024 was raised by five funds of $10 billion or more (totaling $89 billion between them).12 That trend continued in early 2025, as Ares Management Corp said it received 17.1 billion euros ($17.8 billion) in commitments for its sixth commingled European direct lending fund, exceeding expectations and taking available capital for its European direct lending strategy to about 30 billion euros.13
As a result, new entrants are likely to have to acquire direct lending sector expertise or focus on specialty niches, such as asset-backed or royalty finance, With Intelligence says.
While direct lending to private equity buyout sponsors and to GPs’ portfolio companies remains the mainstay of the asset class, asset-backed structures, opportunistic credit solutions, and special situations are also seeing growth. Specialty finance and opportunistic credit solutions accounted for 30% of mandates tracked by With Intelligence in 2024, up from 21% in the previous year, as direct lending’s proportion declined to 50% from 58%.14
Net Asset Value (NAV) lending is also increasingly being used by GPs at a portfolio level. Applications include paying special dividends to LPs, which has attracted criticism for increasing leverage. But NAV loans are more often used to finance strategic growth and bolt-ons at portfolio companies, or to raise capital to deploy in follow-on opportunities deeper into the life of a fund that would ordinarily be funded by the GP exiting earlier investments, according to Citco.15 The fund administrator reports a 30% compound annual growth rate in NAV facilities utilized by its clients between 2019 and 2023.16 S&P Global forecasts that the market for NAV loans will double from the mid-2024 level of $150 billion in the two years to mid-2026.17
NEPC views options other than direct lending as a way to spread credit risk and exposure. “It’s a nice diversifying allocation to a corporate credit allocation,” says Sarah Samuels, a Partner at the Boston-based investment consulting firm. “It’s a different type of exposure, which we like, and there’s less capital.” Ms. Samuels also expects to see increasing interest in transitional capital, such as bridge financing, and NAV loans, as both GPs and LPs seek liquidity.
“Even as interest rates in several key economies appear to have peaked, investor sentiment towards floating rate private credit is positive because the spread, or relative yield, over comparable public debt instruments remains attractive.”
– Hideaki Miyajima Ph.D., Executive Vice President, Professor, Waseda University
“Private equity and private debt should remain poised for good long-term performance in an environment where interest rates remain above the 15-year average in many markets, such as the US,” says Mr. Miyajima. He notes that, “even as interest rates in several key economies appear to have peaked, investor sentiment towards floating-rate private credit is positive because the spread, or relative yield, over comparable public debt instruments remains attractive.”
In addition to attractive relative yields, private credit typically exhibits better pricing and deal terms versus public debt, capital structure seniority, conservative debt levels at portfolio companies, robust credit protections, lower default rates and better recoveries — all of which combine to make the asset class one of the most compelling risk-return propositions18 in the market today, says Adams Street Partner & Head of Private Credit, Bill Sacher.
“Even when base rates bottom, which could be a multiyear process, they are likely to remain high relative to the post-global financial crisis lows,” he says. “This should help preserve the premium yields generated from first lien senior secured private credit loans and help it to continue to compare favorably to most debt alternatives in the market. We believe we are still in the initial stages of an attractive vintage period for the private credit asset class.”
Deal Pipeline
Private Equity Deal Pipeline: No Signs of a Slowdown
Private equity saw a resurgence in dealmaking globally in 2024, with deal count rising by 12%, and deal value climbing by 22% from the previous year, to $1.75 trillion, according to PitchBook.19 The total value of global private equity exits reached $902 billion, 20% more than in 2023, PitchBook said.20
The momentum is expected to continue in 2025, bolstered by anticipation of an improving interest rate environment and a plentiful supply of available capital. Transactions such as nuclear power provider Constellation Energy’s $16.4 billion purchase of closely held Calpine Corp,21 whose investors include Energy Capital Partners and the Canada Pension Plan Investment Board, highlight the opportunity for mega deals in the current market climate. Including debt, Constellation’s offer values Calpine at $26.6 billion.
Despite uncertainty about the potential impact on growth of inflation, interest rate levels, and trade policies, LPs are optimistic about the investment environment in 2025, with conditions that appear to be creating a favorable outlook for exits and dealmaking.
Global Private Equity Deal Activity16
Under US President Donald Trump, there are expectations of reduced regulation and a more lenient approach to mergers and acquisitions (M&A). “We are keeping an eye on antitrust regulations and the viability of different deals happening, whether it’s going to be sponsor-to-sponsor transactions or strategic sales,” says NEPC’s Ms. Samuels, who expects to see a pickup in deal activity in 2025.
“We are keeping an eye on antitrust regulations and the viability of different deals happening, whether it’s going to be sponsor-to-sponsor transactions or strategic sales.”
– Sarah Samuels, CFA, CAIA, Partner, NEPC
If the US Federal Reserve eases interest rates, it may improve the outlook for buyouts and transactions that require debt financing.
A reduction in the bid-ask spread “is one of the reasons driving deal activity… I expect overall deal volumes in 2025 to fall somewhere between 2021 and 2023.”
– Jason Malinowski, Chief Investment Officer, Seattle City Employees’ Retirement System (SCERS)
More realistic valuation expectations on the part of founders may also provide a tailwind. A reduction in the bid-ask spread “is one of the reasons driving deal activity,” says Jason Malinowski, Chief Investment Officer at Seattle City Employees’ Retirement System (SCERS). “I expect overall deal volumes in 2025 to fall somewhere between 2021 and 2023.”
The Post-Pandemic IPO Market22
The gradual reawakening of the IPO market is a sign that pent-up demand for dealmaking may be reaching a pivot point. Global IPO volumes reached $123 billion in 2024, up slightly from their 2023 level amid a lack of Chinese listings,23 according to Dealogic. IPO issuance in the US rose by 63% year on year, while EMEA volumes were up by around 42%,24 showing renewed interest in dual-track processes, where a company simultaneously pursues a public share sale and a possible M&A sale. Mid-market M&A activity looks set to surge in 2025, according to Willis Towers Watson, driven by increased margin pressure, the push for scale, and inorganic growth to accelerate digital transformation.25
Fundamental Focus
Differentiated Exposure and Diversification in Private Markets
Private markets offer differentiated exposure and diversification, points out Mr. Turnill. “What we’re trying to do is diversify into venture and growth, and get more security-specific risk over time rather than broad market risk,” he explains. “We are getting exposure to areas which behave quite differently from the public markets. We wouldn’t be taking those risks if we thought we’re going to get median returns.”
“We are getting exposure to areas which behave quite differently from the public markets. We wouldn’t be taking those risks if we thought we’re going to get median returns.”
– Richard Turnill, Senior Bursar, Trinity College Cambridge
The ability of GPs to pick assets they believe have the greatest potential to thrive over the long term gives LPs potential exposure to a vast universe of what are often the most innovative companies, and which are frequently not accessible through public markets.
More than nine in 10 US companies with revenue above $100 million are private, according to Capital IQ.26 In addition, the median age for a company to go public was 10.7 years in 2024, up from 6.9 years a decade earlier, Morningstar data shows.27 There are now more than 1,300 unicorns — private companies with a value higher than $1 billion — with a total value of $4.5 trillion, with around 60% of them in the US.28
As a result, more and more value is accruing to private markets investors.
Tried and Trusted Investment Relationships
Established relationships are more important than ever, with two-thirds of our respondents saying they will raise commitments to existing managers during 2025, the same proportion as last year’s survey. However, with liquidity suppressed due to the muted exit environment, 26% also expect to reduce allocations to those they currently work with, an 11-point increase from the previous survey.
Further, amid uncertainty over trade, tariffs, interest rates and inflation, 54% of LP respondents say they expect to allocate to new managers, a seven-point drop from last year and the lowest figure over five years of survey findings.
Investor Considerations for Portfolio Commitments in 2025 vs 20245
SCERS is one of those LPs that has maintained its private market allocations, Mr. Malinowski says. “Our goal for private equity and private credit is to generate net-of-fee excess returns against their public market counterparts. For real assets, it’s to provide greater diversification so we can calibrate the risk in our portfolio but not give up all the return we would have had if we just invested in fixed income as our only diversifier,” he adds.
One reason for an expectation of outperformance may be a perception that private markets have a governance advantage over public markets. Our survey found that 85% of LPs and 86% of FAs agree with this.
“Private markets are nimbler than public markets… there tends to be smaller companies whose governance structures allow them to adapt more quickly.”
– Jason Malinowski, Chief Investment Officer, Seattle City Employees’ Retirement System (SCERS)
“Private markets are nimbler than public markets,” says Mr. Malinowski. “There tend to be smaller companies whose governance structures allow them to adapt more quickly.”
Fundraising
Fundraising Revival: LPs Seek Expertise
Liquidity tailwinds may reinvigorate fundraising as LPs redeploy distributions from earlier vintages. Private equity fundraising hit a four-year low in 2024 at $746.5 billion, 18% below the $911.9 billion raised in 2023, according to Private Equity International’s 2024 fundraising report.29
According to survey respondents, managers looking to attract new money from LPs need to demonstrate deep sector and subsector expertise
According to survey respondents, managers looking to attract new money from LPs need to demonstrate deep sector and subsector expertise (43%), individual portfolio manager experience (38%), advanced digital analytics and reporting (35%), and an ability to execute large and complex deals (also 35%).
Expertise in Complex Deals Required to Navigate Difficult Markets5
Although LP optimism about the outlook for dealmaking and liquidity is improving, inflation remains a concern. Alongside volatility, nearly 40% of LPs in our survey cite inflation as a top investment challenge. Geopolitical tensions also present significant risks, with the potential to negatively impact supply chains and critical infrastructure in the year ahead.
Secondary Investments
Secondaries Market: Unlocking Investor Liquidity
2025 is shaping up to be another busy year for the secondaries market, which has solidified its role as an important portfolio rebalancing and liquidity management tool.
Two out of five investors say that a top consideration is selling assets into the secondaries market, the highest figure since our first survey in 2020, with continuation vehicles increasingly viewed as a valuable tool.
In 2024, secondary market transaction volume rose 45% over the previous year to a record $162 billion, eclipsing the prior mark of $132 billion achieved in 2021, according to Jefferies.30 GP-led deals made up 44% of total deal volume, partly driven by increasing adoption of continuation vehicles, the report noted. Momentum is expected to continue into 2025, with heightened activity in the mid-market as firms offer innovative solutions to meet investor liquidity needs.
Secondary Market Volumes Growing and Evolving30
“Acquiring assets in less competitive processes with a focus on small- and mid-market buyout, which has historically offered greater potential for outperformance and value creation, should prove pivotal,” said Jeffrey Akers, Partner & Head of Secondary Investments at Adams Street.31 “We expect GPs to increasingly restrict access to secondary processes to select buyers. This should benefit buyers with existing relationships and a focus on smaller transactions, which is an undercapitalized subset of the secondary buyer universe.”
“Acquiring assets in less competitive processes with a focus on small- and mid-market buyout, which has historically offered greater potential for outperformance and value creation, should prove pivotal.”
– Jeffrey Akers, Partner & Head of Secondary Investments, Adams Street Partners
Although secondary fundraising fell below the record $118.9 billion achieved in 2023, it ended 2024 at a robust $97.5 billion, according to Secondaries Investor.32 Paris-based Ardian led the way. In January 2025 it announced the closure of its ninth secondaries vehicle at $30 billion, a record for the asset class and also the biggest secondary-focused private equity fund in history.33
What Sectors and Strategies Are Seen as the Most Promising for Private Markets Investments in 2025?5
Secondaries were seen as offering the best investment opportunities for about 28% of LPs in our survey, up from 24% in 2023. The utility of secondaries as a portfolio management and liquidity tool is not the sole driver of growth, according to Morgan Stanley.34 Continuation vehicles offer the potential for outsized risk-adjusted returns and perform in line with vintage-matched buyout funds with lower downside risk, according to the bank’s analysis of continuation funds and buyout funds in vintage years 2018-2023.35
“We think continuation vehicles are going to extend into 2025 and beyond… We’re even seeing some funds being raised to just invest in continuation vehicles.”
– Sarah Samuels, CFA, CAIA, Partner, NEPC
“We think continuation vehicles are going to extend into 2025 and beyond,” says Ms. Samuels, who notes that NEPC saw a meaningful increase in dollars going into secondaries in 2024, with GP-led secondaries expected to continue to gain traction. “We’re even seeing some funds being raised to just invest in continuation vehicles. We’re also seeing a majority of LPs decide to take their liquidity when it’s offered, as opposed to rolling into a CV.” That said, LPs are evaluating continuation vehicles based on GP adherence to best practices, alignment of interests, and transparency in terms, as well as the strategic rationale for such investments, she adds.
Secondary Transactions Can Provide Exposure to More Mature Investments36
Although institutional investors have long driven the expansion of private markets, individual investors are poised to power the next phase of growth and innovation for the industry. Secondaries often offer a compelling entry point by providing access to private assets that have historically demonstrated lower risk, shorter durations, and greater liquidity compared with traditional private equity investments.37
A concerted push to attract more retail capital — supported by the rise of evergreen vehicles, such as funds registered under the Investment Company Act of 1940 — could accelerate the growth of secondaries
A concerted push to attract more retail capital — supported by the rise of evergreen vehicles such as funds registered under the Investment Company Act of 1940, the European Long-Term Investment Fund framework38 and the UK’s Long-Term Asset Fund structure39 — could therefore accelerate the growth of secondaries. Individual investors are drawn to strategies such as secondaries, which can present opportunities to acquire high-quality diversification, often in appreciating assets that are being acquired at a discount.40 Secondaries are also likely to play a key role in evergreen structures, as they have historically helped to mitigate the J-curve effect and provided an efficient allocation strategy for long-term investors.41
Co-Investments
Co-Investments: The Cost-Efficient Alt
LPs are also bullish on co-investments, with nearly a third of our survey respondents identifying the strategy as a key opportunity this year.
“It’s a great time to be a capital provider,” NEPC’s Ms. Samuels says. “It could be buying secondary stakes, doing co-investments — where you’re providing capital to a GP who needs more outside of the fund than they can get — or it could mean being a lender.”
Our survey shows that 88% of LPs intend to allocate up to 20% of their portfolios to co-investments over the next five years. As deal sizes grow, co-investments are viewed as an increasingly important tool for lead sponsors to complete transactions that they otherwise could not consider because of concentration limits for any individual company in a fund. As a result, many GPs are engaging LPs earlier and more frequently as a potential source of co-investment capital.
Investors see value in co-investments for their favorable economics, diversification potential, and because co-investments can help to foster deeper relationships with GPs with whom they are already primary investors. Institutions such as the California Public Employees’ Retirement System, Alaska Permanent Fund Corporation, Florida State Board of Administration, and Arizona State Retirement System are among those leaning further into this strategy.42
Demand for Co-Investments is Growing Steadily5
AI Drives Venture & Growth
AI-Fueled Venture and Growth Equity Recovery
Digitization is disrupting every sector of the global economy, driving significant innovation and growth. Many high-potential companies are venture and growth equity stage private businesses, making tech-focused private market funds increasingly attractive to investors. Nearly half of respondents (47%) say technology and healthcare offer the greatest private markets opportunities in 2025. That compares with 40% in our 2022 and 2023 surveys, and 35% in 2021.
Investor enthusiasm for venture capital and growth equity is improving. In venture, 26% of respondents plan to deploy more capital into the strategy this year, up from 17% last year. This represents a year-on-year improvement of more than 50%, the largest increase for any strategy among responding LPs.
Venture deal activity totaled $209 billion in 2024,43 above pre-covid levels, according to PitchBook and the National Venture Capital Association (NVCA), a significant indicator of a long-awaited recovery following a challenging period.
Venture deal activity totaled $209 billion in 2024,43 above pre-covid levels, according to PitchBook and the NVCA, a significant indicator of a long-awaited recovery following a challenging period
According to Brijesh Jeevarathnam, Partner & Global Head of Fund Investments at Adams Street Partners, robust innovation at the heart of company creation has remained strong over the past five years and will continue over the next decade. “In addition, the customers of venture-backed companies today operate across every part of the economy including financial services, agriculture, logistics, transportation, healthcare, and hospitality. Every industry is transforming itself through technology,” he says.
Venture-backed firms benefit from two key advantages: a deep-pocketed, hungry customer base, and accelerating innovation that — owing to AI and the rapid expansion of data and accelerating power — is becoming increasingly accessible. “That combination of customer and fast-paced innovation cycle fuels venture capital investments today,” Mr. Jeevarathnam adds.
Marcus Lindroos, a Principal on the Primary Investments Team at Adams Street Partners, describes venture capital as a key enabler of change and innovation. “Venture capital is an interesting opportunity for investors to capture technological innovation,” he says, noting that recent public market tailwinds have been largely driven by technology, with AI driving value creation.
“Venture capital is an interesting opportunity for investors to capture technological innovation,” Mr. Lindroos says, noting that recent public market tailwinds have been largely driven by technology, with AI driving value creation.
– Marcus Lindroos, Principal, Adams Street Partners
Investment in AI and machine learning startups rose by more than 50% to $131.5 billion in 2024, accounting for 35.7% of all dollars allocated to venture globally, according to PitchBook.44 This reinforces our view that venture deal activity will continue to improve in 2025, particularly for high-quality startups focused on AI innovation. Our market observations show that AI is accelerating innovation and driving significant investment across the technology stack, including AI foundational models, infrastructure, and developer tools, as well as in the application layer.
Investment in AI and machine learning startups rose more than 50% to $131.5 billion in 2024, accounting for 35.7% of all dollars allocated to venture globally, according to PitchBook44
Growth equity is also likely to benefit from the surge in interest in AI. The proportion of LPs planning to allocate up to 20% of their private market assets into the strategy climbed by three points to 88% from a year ago, marking the fourth consecutive year of rising interest in the space.
As leading AI companies continue to improve output efficiency and demonstrate tangible returns on investment, we believe the growth equity market is set to experience a significant surge in investments focused on generative AI use cases.
Technological innovation is one reason growth equity is seeing a resurgence in LP interest. Another is that many companies that delayed raising capital from 2022 to 2024 because of unfavorable valuations now need to raise capital because their cash balances have dwindled. However, many non-traditional growth equity participants, such as hedge funds, have now left the market. As a consequence, demand for growth equity capital currently exceeds supply,45 which should create opportunities for investors.
Mr. Jeevarathnam notes that growth equity valuations have stabilized. “When there’s a quality company that is raising capital, there’s flight to that quality and a lot more investor interest. In the heyday of the zero interest rate period, almost every company was able to earn a premium valuation just based on top-line growth. Now, it’s not just the growth, but also the quality of the growth and how sustainable it is — there’s a lot more focus on fundamentals.”
Profitable growth has therefore supplanted a growth-at-all-costs mentality. “It’s not just, ‘let’s get customers, let’s do a land grab, let’s just keep growing the top line, and we bleed money at the bottom line and keep raising more capital’. That game is now over,” Mr. Jeevarathnam adds.
AI Platform Shift
Geopolitical Impact
Geopolitical Risks and Policy Shifts in Private Markets
Geopolitical risks and evolving policies are in focus this year and are expected to influence private market strategies. Over 80% of respondents to our survey say that geopolitics will impact their investment approaches. Key concerns include US-China tensions (54%), the Ukraine-Russia war (53%), and US political instability (37%).
Geopolitics a Top Concern for Investors5
President Trump is expected to bring about policy changes including tax cuts and deregulation, which could benefit markets by boosting growth and easing compliance burdens, especially for small and mid-sized businesses. Smaller private companies (many of which are more burdened by regulations than larger public entities) and fund managers stand to gain from changes in reporting and compliance requirements. Deregulation could also be a positive for domestic M&A activity, but there is concern that higher tariffs could be inflationary and hinder growth.
Mr. Miyajima adds that President Trump’s protectionist policies could come at the expense of trade benefits such as improved negotiations for goods and services. However, he believes Japan – where private equity penetration has been historically low – is well positioned to capitalize on opportunities in the new world economy.
“Both the Japanese government and domestic companies are pushing for more corporate restructuring, which could be interesting investment opportunities for private markets firms,” he says.
Although many underlying economic factors appear to be trending positively, the impact of President Trump’s policies remains a wild card. Higher tariffs are expected to drive up the cost of goods, potentially impacting inflation and consumer demand. Investors are closely monitoring how the administration’s policies will shape capital flows.
Notably, the US withdrawal from the Paris climate agreement51 in January 2025 marks the first step in what could be an aggressive agenda to roll back the country’s climate policy, including billions of dollars in clean energy spending by the previous administration.52 The move could give the US’s competitors an advantage in the race to dominate clean energy manufacturing.53
Support for fossil fuels could also cast a shadow over the future of ESG and sustainability policies, with a rollback of ESG-related regulations impacting climate action, at least in the short term. Our survey reflects this shift: 31% of LPs ranked ESG investing among the most attractive anticipated investment opportunities in 2025, down from 46% in last year’s survey, and closer to 2021 and 2022 levels.
NEPC’s Ms. Samuels notes that, despite a decline in enthusiasm for ESG initiatives, energy transition influences investment decisions. “The energy transition theme started with infrastructure and building new hard assets to accommodate the transition away from traditional energy,” she points out. “Now, we’re seeing infrastructure have an identity shift and being played out in portfolio companies supporting it. It’s getting into buyout strategies, growth equity, and even venture.”
Trade relations between the US and China remain under scrutiny. Nearly all managers in a recent survey by law firm Dechert anticipate further pressure to move supply chains out of China under President Trump, with tariffs being used to entice companies to build manufacturing capacity in the US.54 Fundraising and deal volumes reflect this, with China experiencing muted activity in 2024.55 LPs with existing allocations to Asia-Pacific are redirecting capital to other markets, such as India and Southeast Asia.56
Investors Continue to Prefer North America and Europe5
Fewer LPs in our survey (36%) say China will offer compelling private market opportunities in 2025, down from 47% in 2024. For emerging Asia-Pacific, however, the figure rose to 38%, from 31% in the previous year.
In Europe, geopolitics may also disrupt fiscal policy amid a slowdown in productivity growth.57 Potentially higher US tariffs and trade measures could negatively affect capital flows and asset prices in the region.
Conclusion
Optimism Builds for Private Markets in 2025
The outlook for private markets is decidedly more optimistic in 2025 than in the past two years, with investors expecting to benefit from increased dealmaking and liquidity. This, in turn, should catalyze a rebound in fundraising, especially for buyout, secondary, co-investment, and private credit strategies, according to our survey’s findings.
The outlook for private markets is decidedly more optimistic in 2025 than in the past two years, with investors expecting to benefit from increased dealmaking and liquidity
AI increasingly looks like an unstoppable trend and a transformative force, and is likely to continue to drive significant investment in venture and growth equity. The financial front-runners in this AI wave will be firms adept at identifying and leveraging areas where the technology adds value.
As private markets evolve and become more accessible to a broader range of investors, we are also likely to see innovation in product design and the emergence of new investment structures. This evolution is likely to create a dynamic investment landscape that offers diverse opportunities for growth and value creation.
About this Research
Over six weeks leading into 2025, Adams Street Partners surveyed 200 limited partners and financial advisors for their views on a variety of topics that were a cause for optimism or concern. Participants included pension funds, institutional accounts, and portfolio managers located in the US, Europe, and APAC.
The findings of this research are shared across a variety of media to effectively highlight key conclusions on geopolitical risk, ESG trends, and the outlook for select strategies, sectors, and geographies. Included in the research are insights into what institutional investors report they are considering to best seize opportunities in the future.
Contributors
We would like to thank the following experts for their participation:
- Jeff Diehl, Managing Partner & Head of Investments, Adams Street Partners
- Jeffrey Akers, Partner & Head of Secondary Investments, Adams Street Partners
- Brijesh Jeevarathnam, Partner & Global Head of Fund Investments, Adams Street Partners
- Marcus Lindroos, Principal, Primary Investments, Adams Street Partners
- Jason Malinowski, Chief Investment Officer, Seattle City Employees’ Retirement System (SCERS)
- Hideaki Miyajima Ph.D., Executive Vice President, Waseda University
- Sarah Samuels, CFA, CAIA, Partner, NEPC
- Richard Turnill, Senior Bursar, Trinity College Cambridge
Disclosures/Important notes
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 Venture Monitor Q4 2024, January 13, 2025, Pages 7-9.
5. Adams Street Partners, Global Investor Survey, 2025.
6. Preqin 2025 Private Markets Outlook, September 18, 2024, Page 3.
7. Ibid.
8. Citi Wealth, Investment Strategy Bulletin, January 4, 2025, Page 4.
9. MSCI Private Capital in Focus: Q2 Returns and an Exploration of Holding Periods, September 24, 2024.
10. Internal Rate of Return on a rolling three-year horizon through June 2024 shows an 8.6% return for private equity and an 8.3% return for private debt, according to Preqin data accessed March 17, 2025. Through December 2023, data show private debt returning 15.8% versus 12.8% for private equity.
11. PitchBook, H1 2024 Global Private Debt Report, Page 4, September 24, 2024.
12. With Intelligence, Private Credit Outlook 2025, January 2025.
13. Ares Management, Ares Management Raises €30 Billion for European Direct Lending Strategy, January 14, 2025.
14. With Intelligence, Private Credit Outlook 2025, Page 3, January 2025.
15. Citco, NAV lending grows rapidly as heightened disclosure looms, May 13, 2024.
16. Ibid.
17. S&P Global, CreditWeek: How Are Funds Using Net Asset Value Loans? May 16, 2024.
18. Past performance is not a guarantee of future results. Investments are subject to loss, including a complete loss of capital.
19. PitchBook, Annual Global PE First Look, January 2025.
20. Ibid.
21. Constellation, Constellation to Acquire Calpine, January 10, 2025. 15.8% versus 12.8% for private equity.
22. EY, Nine factors that could drive the IPO market in 2025, January 30, 2025.
23. ION Analytics, Dealogic 2024 Full-Year ECM Highlights: Year of recovery ahead of Trump 2.0, December 17, 2024.
24. Ibid.
25. Willis Tower Watson, Global post-election surge in large M&A deals sets pace for 2025, January 13, 2025.
26. Capital IQ data screens as of January 21, 2025.
27. Morningstar, Unicorns and the Growth of Private Markets, January 21, 2025.
28. Ibid.
29. Private Equity International, Download: 2024 was weakest year for fundraising since covid-19 pandemic, January 9, 2025.
30. Jefferies, Global Secondary Market Review, Page 2, January 2025.
31. Past performance is not a guarantee of future results. Investments are subject to a loss, including a complete loss, of capital.
32. Secondaries Investor, Behind 2024’s fundraising dip, January 9, 2025.
33. Ardian, Ardian raises record $30 billion for world’s largest-ever secondaries platform, January 16, 2025.
34. Morgan Stanley Private Capital Advisory, The Case for Continuation Funds: An Initial Performance Review, August 2024.
35. Ibid. Past performance is not a guarantee of future results. Investments are subject to a loss, including a complete loss, of capital.
36. Adams Street Advisor Academy, Private Equity Secondary Investments, February 6, 2025. There can be no guarantee as to the timing or size of cash flows or the timing of a secondary purchase and cash flows depicted are for illustrative purposes only and do not reflect actual cash flows of Adams Street Partners secondary investments. Past performance is not a guarantee of future results.
37. Past performance is not a guarantee of future results. Investments are subject to a loss, including a complete loss, of capital.
38. European Commission, European Long-term Investment Funds – frequently asked questions, 2015.
39. AIMA, UK Long-Term Asset Fund (LTAF).
40. There can be no guarantee as to the quality, level of diversification, attractiveness of an asset’s discount, or timing of transactions related to future deals. Past performance is not a guarantee of future results. Investments are subject to loss, including a complete loss of capital.
41. Ibid.
42. Private Equity International, Co-investments prove a fundraising clincher: Story of the Year; Why co-investments funds will likely remain a private equity niche, December 17, 2024.
43. PitchBook and National Venture Capital Association Venture Monitor Q4 2024, January 13, 2025, Pages 7-9.
44. PitchBook, AI startups grabbed a third of global VC dollars in 2024, January 9, 2025.
45. PitchBook VC Dealmaking Indicator, Capital Demand-Supply Ratio, March 10, 2025.
46. The Economist, Will the bubble burst for AI in 2025, or will it start to deliver?, November 18, 2024.
47. S&P Global, Private equity-backed investment surge in generative AI defies 2023 deal slump, March 1, 2024.
48. Gartner, Gartner Predicts 30% of Generative AI Projects Will Be Abandoned After Proof of Concept By End of 2025, July 29, 2024.
49. Bain & Company, Healthcare IT Spending: Innovation, Integration and AI, September 2024.
50. Past performance is not a guarantee of future results. Investments are subject to loss, including a complete loss of capital.
51. The White House, Putting America first in international environmental agreements, Executive Order, January 20, 2025.
52. Reuters, Biden pushes out over $100 billion in clean energy grants as term winds down, December 3, 2024.
53. Financial Times, ‘Self-inflicted wound’: Trump’s tariff chaos threatens US energy ambitions, February 6, 2025.
54. Dechert, Global Private Equity Outlook, 2025, Page 9.
55. PitchBook, Asian PE fundraising moves away from China, January 2, 2025.
56. Ibid.
57. European Commission, Productivity growth in the EU: is there a trade-off with employment growth?, November 15, 2024.
Important Considerations: This information (the “Paper”) is provided for educational purposes only and is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements in this Paper are made as of the date of this Paper unless stated otherwise, and there is no implication that the information contained herein is correct as of any time subsequent to such date. All information has been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. References herein to specific sectors, general partners, companies, or investments are not to be considered a recommendation or solicitation for any such sector, general partner, company, or investment. This Paper is not intended to be relied upon as investment advice as the investment situation of individuals is highly dependent on circumstances, which necessarily differ and are subject to change. The contents herein are not to be construed as legal, business, or tax advice, and individuals should consult their own attorney, business advisor, and tax advisor as to legal, business, and tax advice. Past performance is not a guarantee of future results and there can be no guarantee against a loss, including a complete loss, of capital. Certain information contained herein constitutes “forward-looking statements” that may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Any forward-looking statements included herein are based on Adams Street’s current opinions, assumptions, expectations, beliefs, intentions, estimates or strategies regarding future events, are subject to risks and uncertainties, and are provided for informational purposes only. Actual and future results and trends could differ materially, positively or negatively, from those described or contemplated in such forward-looking statements. Moreover, actual events are difficult to project and often depend upon factors that are beyond the control of Adams Street. No forward-looking statements contained herein constitute a guarantee, promise, projection, forecast or prediction of, or representation as to, the future and actual events may differ materially. Adams Street neither (i) assumes responsibility for the accuracy or completeness of any forward-looking statements, nor (ii) undertakes any obligation to update or revise any forward-looking statements for any reason after the date hereof. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements. Adams Street Partners, LLC is a US investment adviser governed by applicable US laws, which differ from laws in other jurisdictions.
