Issues facing the Private Equity sector right now
We understand the issues facing the sector at present and work with clients to navigate and add their voice to commentary on the market:
Macroeconomic and Geopolitical Headwinds
Persistent inflation, elevated interest rates, and tariff volatility continue to stall dealmaking and complicate valuation strategies. Elevated valuations especially from the 2021/22 boom, coupled with an uncertain lending environment are delaying exits.
Exit Challenges & Capital Lock-In
PE firms are holding a record number of unsold assets as exit routes remain constrained. As of mid-2025, many portfolio companies have been held for over five years, prompting increased use of continuation funds to offer LP liquidity amidst limited options.
Regulatory & Compliance Complexity
Cross-border dealmaking is grappling with greater regulatory scrutiny—from investment screening (e.g., CFIUS, UK CMA) to data privacy, ESG reporting, and valuation transparency. These factors are raising compliance burdens and slowing transaction flow.
Operational Overhaul & Asset Diversification
Firms are expanding into private credit, infrastructure, secondaries, and even retail products, increasing operational and back-office complexity. This demands enhanced systems for FP&A, investor relations, and regulatory readiness.
Liquidity & Retail Investor Access
Recent US policy shifts are opening the door to include private equity in 401(k) plans. Mixed signals around diversification potential, but critics warn of illiquidity, high fees, and systemic risks if retail sentiment turns sour.
Sector Selectivity & Market Realignment
LPs and GPs are showing selective appetite. While exits remain scarce, certain sectors like infrastructure, professional services, digital/AI, and energy (particularly in Europe) are holding up, offering paths forward amid broader activity stagnation.
Tech, AI & ESG: From Compliance to Value Creation
- ESG and sustainability norms are shifting from box-ticking to strategic value creation—requiring robust due diligence, decarbonisation planning, and nature-related assessments.
- AI is transforming deal origination, due diligence, and portfolio management. However, firms must pair it with human insight and manage emerging data risks.