Q3 2025 Pulse Check: Private Markets Investment Themes

Direct Credit Investing

Access to the private credit market, emphasizing current yield with an aim toward downside protection

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• Deal activity: 2024 was a record-setting year in which we reviewed $16.4B in opportunities. This trend continued into 2025, with YTD deal flow having already surpassed 2024 levels, reaching nearly $23B in deals reviewed through mid-October 2025. 
• Funding gap: Significant tailwinds remain for private credit. As of Q1 2025, there was a $1T funding gap between the amount of buyout dry powder that was raised and the amount of credit capital available to support that buyout dry powder. When we marry that figure with the maturity wall data, we estimate that there is comfortably more than $2T of market opportunity over the next few years, which the banks will not satisfy. 
• Market environment: Looking ahead, credit's continued strong deal flow drivers should continue to create strong deal momentum across incremental facilities, refinancings and a large, approaching maturity wall, even if LBO volumes remain muted.
• Capital solutions: We expect there to be continued demand for opportunistic capital solutions in structures such as HoldCo notes and preferred equity where a maturity wall may demand financing solutions that offer attractive risk/return characteristics such as low LTVs and the potential for equity-like returns.
• Market position: During times of uncertainty, there have historically been flights to quality, with private credit offering both yield and downside protection. Scaled players with robust sourcing will have the advantage of choice, enabling selection discipline.  

Direct Equity Investing

Globally diversified platform targeting the SMID market with unique positioning

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• Deal activity: Amid market uncertainty and trade tensions, deal activity continues to be on pace for another year of growth. This market uncertainty has created opportunity across the PE landscape. Global M&A activity has remained resilient during 2025, increasing 14% for the first half of 2025 over 2024.  
• Fundraising: PE fundraising dropped to its lowest level in 18 months during Q2 2025. Despite broader fundraising being down, our 2025 deal flow is on pace to be another record year. 1H 2025 deal flow on our DE platform is up ~6% YoY. The challenging fundraising environment has emphasized the need for GPs to partner with strategic co-investment/direct equity investors with an efficient process and scale.  
• Liquidity: What may not be a surprise is that overall private markets distribution rates are down. While the IPO market may be opening again for large/mega funds, that’s really the only practical exit strategy these funds have. Over the last 20 years, middle-market deals have exited via IPO 12% of the time, whereas large/mega deals have exited via IPO 82% of the time. So, even when the IPO market opens back up for large/mega investors, their potential returns can remain locked up for the next 18 months – or longer depending on when the GP decides to sell shares – taking on public market risk without the benefit of liquidity access. This is another reason why we focus on the middle market.  

• Market position: Our direct equity platform continues to be well-positioned. Amidst uncertainty, we continue to focus on middle-market companies within legal, accounting, consulting, tech, infrastructure and healthcare services sectors. These segments have historically generated consistent revenue streams across varying economic cycles. They are defensible, typically fragmented across different states and service niche, local markets with their own jurisdictional legal and permitting rules. 

Emerging Managers

Early access and introductions to best-in-class emerging and diverse-led managers across primary funds and co-investment transactions

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• Fundraising: The fundraising cycle for emerging managers remains extended. A select subset of managers have closed quickly, exceeded targets and are now considered oversubscribed, while most continue to seek multiple extensions from LPACs to complete their raises. 
• Liquidity: The liquidity backdrop still shows capital calls outpacing distributions. Softer M&A activity pressured by higher interest rates and tariff-related headwinds, has been a meaningful driver. That said, late Q3 into Q4 is showing early signs of improvement. With short‑term interest rates easing and several exit processes advancing, we expect distributions to LPs to pick up. 
• Co-investment activity: Small‑cap co‑investment activity opened the quarter in a lull as volumes plateaued amid intense competition. Momentum improved toward the end of the period, and we expect the current backlog to begin coming to market. 

Primary Fund Investing

High-quality primary fund investments with often hard-to-access general partners

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• Investment quality: This continues to be a market where high-quality assets trade while a general malaise on the deal flow front remains; however, GPs have noted that there is a noticeable pick-up in activity, particularly on the add-on front.
• Macro uncertainty: GPs have accepted that macroeconomic noise is here to stay and are striving to generate the returns that investors expect; they just might need a bit more elbow grease than expected.
• Equity: Equity GPs who are fundraising, while expecting a tough 2025, may find less competition than anticipated as managers push fundraising efforts to later in 2025 and into 2026. We have already heard of GPs who are pushing from 2026 to 2027 and 2027 to 2028, a continued sign of more disciplined deployment while managing assets that were invested in frothier times.
• Credit: Credit fundraising and deployment remain robust and steady; however, these managers are also waiting for an increased flow in M&A. In the meantime, spreads above SOFR have compressed as competition is stiff for the transactions that are occurring as everyone has closed on capital that is ready to be deployed. 

Impact Investing

Seeking to deliver attractive returns while generating meaningful and measurable impact

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• Deal flow: Direct impact deal flow continues to thrive, with 2024 setting a new record for both number of deals (173) and total opportunity size ($6.6B). The Impact team’s deal flow sourcing engine is working well, with continued growth of inbound deals both from sponsors and businesses as well as advisors directly.
• Sourcing: We are focused on continuing to expand deal flow sourcing in 2025, with proactive outreach to GPs in the U.S. and globally.
• Tariff risks: Our impact portfolios are largely insulated from increased tariff risks given their typical focus on regional businesses with minimized cross‑border revenue exposure; within the environmental theme, software‑service and domestic‑manufacturing‑oriented renewable energy businesses remain attractive, while in social impact, services businesses are a focus given their tariff‑resilience. 
• U.S. policy: Post‑OBBBA, tax credit parameters and “begin construction” deadlines are more defined—and in some cases tighter—prompting investors to recalibrate underwriting and delivery schedules while the opportunity set across energy transition and efficiency remains substantial. In particular, technology‑enabled and regionally focused businesses continue to benefit from durable demand drivers despite policy noise.
• Energy demand: A significant build‑out remains necessary to meet power needs from AI and data centers, and the U.S. administration continues to champion AI‑led growth; industry participants expect near‑term supply shortfalls and heightened grid‑stability requirements. Interest in geothermal is accelerating given its firm, “always‑on” generation profile suited to critical loads. Importantly, these aren’t just infrastructure plays—there is a meaningful private equity opportunity across services and operating companies that design, build and maintain critical systems (e.g., HV substation engineering for data centers, building‑efficiency upgrades, software and analytics, etc.), which help target markets improve reliability and efficiency.

Infrastructure & Real Assets Investing

Access to primary, secondary and direct investments across infrastructure and natural resources

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• Deal activity: Global M&A activity in infrastructure and energy remained subdued in 1H 2025, with both deal value and volume declining year-over-year. Europe led in deal count but saw a decline in overall value, indicating a shift toward smaller transactions and fewer megadeals. The region’s activity was concentrated in energy and utilities, with ongoing interest in decarbonization and energy transition themes. North America dominated by deal value, while APAC showed targeted growth in renewables and transport, highlighting regional differences in investment focus. APAC’s activity suggests a strategic pivot toward sustainable infrastructure, while North America continues to attract large-scale capital deployment across diversified asset classes. 
• Fundraising: Fundraising momentum in 2025 has been strong, with capital raised in the first three quarters already surpassing previous annual records. Approximately $200B was raised through Q3, which exceeds the full-year totals for both 2021 and 2022, positioning 2025 to become a record-breaking year for infrastructure fundraising. With several large funds still in market, the final tally could climb significantly higher.   
• LNG/gas storage: The global LNG market is experiencing robust growth, driven by the increasing role of natural gas as an essential fuel source. In addition, some regions, particularly Europe, are looking for secure and reliable gas supply and storage solutions; hence land-based terminals and Floating Gas Storage Units (FSRU) are becoming vital to meet demand in regions lacking pipeline and storage infrastructure or seeking rapid deployment solutions. FSRUs are increasingly favored vs. land-based terminals due to their lower upfront cost, environmental impact, speed to market and geographical flexibility. Overall consumption is projected to grow from approximately 563 bcma in 2023 to over 900 bcma by 2040, with FSRUs expected to expand in tandem. 
• Infrastructure secondaries: Our deal flow for GP- and LP-led secondaries is expected to set a record in 2025, with YTD volumes already at $36B vs. 2024 at ~$30B. Our Infrastructure team has declined about one third of YTD opportunities and closed on less than 2%. The split between GP- and LP-leds is roughly 50/50. Recently, we have observed tighter pricing for larger LP positions (>$500M). Asset quality, growth potential, entry pricing and alignment of interest remain key hurdles for GP-led deals. 

Real Estate Investing

Seeking to deliver attractive, risk-adjusted returns across primary fund commitments and transactions within real estate

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• Geopolitical and macroeconomic impacts: Across real estate sectors, slower economic growth expectations have tempered demand and created uncertainty in cyclical sectors (e.g., multifamily and industrial). Additionally, recent geopolitical events, such as tariff negotiations, trade policy shifts, continued inflation and a U.S. government shutdown have amplified economic volatility. However, lower interest rates, overall solid real estate fundamentals and early recovery in capital markets and transaction volume should provide investors with a level of comfort as the market navigates through the evolving macroeconomic and geopolitical landscape.
• Real estate fundamentals: Significant new supply over the last couple of years has weighed on certain sectors, including multifamily, industrial and self-storage. High borrowing and construction costs persist across real estate markets, pointing to a continued decline in new deliveries in the second half of 2025 and into 2026. Overall, as of September 2025, senior housing and data centers have the strongest fundamentals due to positive long-term tailwinds such as an aging population and the increase in spending on artificial intelligence, respectively.
• Capital markets: Debt availability continues to stabilize but remains bifurcated by lender type. CMBS issuances have recovered off 2023 and 2024 lows, while investor demand for SASB and CRE-CLO deals increased despite distress and loan defaults in certain pockets. Regional banks are selectively lending, focusing on existing relationships, lower LTVs and stabilized assets. Construction lending is highly constrained, except for pre-leased projects with strong sponsors. Life companies remain active and price-competitive for institutional-quality, long-duration, low-leverage loans.  
• Transaction activity: Commercial real estate transaction volumes have begun to recover following a significant downturn during the previous two years, with aggregate transaction volumes rising 3.8% quarter-over-quarter. Key factors contributing to this recovery include improved capital market conditions, stabilized asset valuations and a rapid slowdown in new construction starts.  
• Investment selection: Market selection and sector focus have become critical determinants of success in today’s real estate market. As the performance gap between sectors continues to widen, investors have taken a selective investment approach, prioritizing assets in supply-constrained markets showing significant signs of growth.

Secondary Investing

A shorter duration complement to an overall private markets portfolio

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• Deal flow: We have screened $315B+ of deal flow through mid-October 2025. This has surpassed the record $270B screened in all of 2024, and we still have more than two months left in the year. Over the past five years, the volume of deals we have reviewed has been approximately 2x more than what actually closed in the market, on average. 
• Record volume: Per Jefferies, 1H 2025 saw $103B in closed transactions (54% LP-led / 46% GP-led). 1H 2025 deal volume marked the highest half-year total on record, up 51% compared to 1H 2024. With 2H typically being larger than 1H, secondary market volume is on track for another record-setting year in 2025, projected to reach over $200B.
• Capital overhang: Growth in secondary market volume continues to outpace available buyside capital. As of 1H 2025, the ratio of secondary dry powder to total market volume sits at 0.9x. This means that if there were no additional secondary dollars raised, dry powder would run out in less than a year. This is considerably lower than the broader buyout market where the capital overhang ratio is typically closer to 3.0x. This is a compelling dynamic for secondary buyers who can be very selective.  
• Strong pricing: Average pricing increased about 100 bps from 2024 to approximately 90% of NAV. There was a slight dip in pricing in April after tariff announcements, but pricing quickly rebounded and continued the trend of steady price increases since 2022. Pricing upticks have in part reflected younger and higher-quality funds trading, as well as valuation momentum between the secondary’s record date and closing. We continue to average double-digit closing discounts, taking advantage of sourcing and information advantages to identify high-quality assets with embedded value and limited competition.
• Tailwinds: LP interest volume continues to be driven by a slow exit environment with paltry PE distributions. Portfolio rebalancing and commitment pacing are top of mind for investors, and political pressures have further motivated sales by certain types of institutions. GP-led solutions continue to see broad acceptance – 75% of the 50 largest global GPs have now used a CV. We have also taken advantage of market uncertainty during 2025, with structured transactions such as preferred equity solutions. GPs often prioritize working with firms, which have the scale and experience to execute highly customized, mutually beneficial structured transactions.   

Venture Capital & Growth Equity Investing

Seeking to access top-tier venture and growth equity companies through funds, secondaries and direct investments

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• New rounds: Deal activity improved modestly in the third quarter, with mixed dynamics beneath the headlines. New deal volume was largely unchanged, but startup capital funding rose, concentrated in nine rounds that comprised nearly 40% of VC capital closed. The skew was again attributable to several mega artificial intelligence fundraises that closed in the quarter. 
• Artificial intelligence: Investor appetite for AI companies remains robust, accounting for nearly 50% of all U.S. deals in Q3. 2025 has already surpassed all AI funds raised in 2024 with still another quarter of the year to go. While mega rounds for AI companies slowed from their highs in terms of absolute dollars raised, foundational model companies continued to close very large, oversubscribed rounds during the quarter.
• GP fundraising: Funds raised by GPs slowed during the third quarter while activity increased with several established and scaled VC firms kicking off processes at the end of the quarter targeting end of year or early Q1 2026 closes. 
• Exit environment: The traditional exit market remained subdued in Q3 outside of a few notable IPOs such as Figma, Gemini and Figure. Although the M&A market picked up, the overall traditional exit environment remains slow. This dynamic continues to put pressure on GPs to get distributions back to LPs as they look to raise new funds. This need for liquidity has been favorable for sophisticated buyers in the VC secondaries space as GPs continue to look for creative ways to manufacture DPI and LPs look to rebalance their portfolios.