Hey there!
Winter’s rolling in, and so is that moment when everyone starts looking back at the year that just flew by.
Last week, we took a look at how Europe’s venture capital scene developed in 2025. This week, we’re keeping the momentum going and turning our attention to private equity — a market that had its own set of shifts, surprises, and standout moments.
As we wrap up the year, it feels like the right time to step back and recap the trends, pivot points, and signals that shaped European private equity. Let’s dive in.
Europe - A Magnet for Global Capital
Europe is attracting remarkable attention from global investors this year, and the story is evident from two angles. On the private-capital side, international LPs have been pouring money into European vehicles, especially infrastructure and natural-resources funds, driving commitments to a record $311 billion in the first nine months of 2025.
Firms like KKR and Blackstone have leaned into this momentum, deploying record amounts in Europe as investors look for stability, long-term assets, and better relative value than in North America.
At the same time, the private-equity landscape inside Europe tells a more nuanced story. Deal activity is strong and accelerating: Q3 PE deal value jumped more than 25% quarter-over-quarter, megadeals are back, and US sponsors are driving a large share of the biggest transactions.
The Fundraising Pressure of 2025 and How GPs Navigate It?
The Private Equity Midyear Report 2025 by Bain & Company shows that LPs are prioritizing liquidity, even if it means accepting exits at lower valuations. A majority now prefer traditional routes such as trade sales and IPOs, while interest in continuation vehicles and other structured solutions remains limited.
The change is already visible in the market, where major players have been active sellers in secondaries, and some pensions have completed multi-billion-dollar sales to rebalance portfolios.
Despite its strong momentum, the secondaries market still represents less than 5% of private assets under management, underscoring that it cannot, on its own, resolve the industry’s broader liquidity challenges.
With distributions under pressure and some GPs still holding onto assets bought at peak valuations, many investors expect more sponsors to pursue sales at prices closer to current market reality.
Private Markets Are Going Their Own Way
Private markets are continuing to decouple from public-market swings, with recent data showing a meaningful decline in the correlation between private assets and the S&P 500.
This decoupling is driven mainly by how private assets are valued and traded. NAVs are updated less frequently, transactions take longer, and liquidity is limited, all factors that make these assets slower to react to public-market swings.
Correlation hasn’t disappeared; it's just weakened. Private markets tend to adjust on a lag, which explains why State Street’s Private Equity Index returned 7.08% in 2024 while the S&P 500 posted 25.02%. Timing, liquidity, and exit conditions now play a bigger role, with interest rates, slower deal activity, and fewer IPOs shaping how the asset class behaves.
Despite these challenges, private markets continue to scale. UBS says the sector reached USD 14.6 trillion in AUM in 2024, and S&P Global projects it could exceed USD 18 trillion by 2027.
In Europe, BlackRock expects private assets to surpass €5 trillion by 2030, driven by strong momentum in infrastructure, private credit, and energy-transition strategies.
More Deal Activity with Long-Term Opportunities
Private equity dealmaking picked up speed in the third quarter of 2025. Global PE deals reached a record US$310 billion across 156 transactions, helped by a handful of very large buyouts.
Better economic conditions, rising stock markets, lower inflation, and growing confidence that interest rates will fall in 2026 helped push activity higher.
One of the most significant changes this year has been the smaller valuation gap. For more than two years, buyers and sellers struggled to agree on price. Now, two-thirds of GPs say that the gap has narrowed, making it easier to get deals done. To keep transactions moving, firms are also using more flexible deal structures, like earnouts or tariff-related protections.
Investor interest has also changed. With new tariffs and macro uncertainty earlier in the year, more capital flowed into sectors seen as steadier or less exposed to global trade issues. Healthcare, financial services, infrastructure, and other essential services all attracted fresh attention.
On the exit side, activity received a meaningful lift. PE firms announced around US$470 billion in exits so far this year, up roughly 40% from the same period in 2024.
LPs are still applying liquidity pressure; most GPs rate the pressure between 6 and 8 on a 10-point scale, but the improved exit market is helping. The IPO window also reopened slightly, with more than US$18 billion raised from PE-backed listings.
Market Insights to Watch in 2026
A recent UBS report on The Year Ahead: global trends influencing private markets heading into 2026, with government debt, geopolitics, and AI-driven productivity at the center of the discussion.
Government debt levels in major developed economies continue to rise, driven by fiscal spending, aging populations, and slower growth. Many countries are already approaching “escape velocity” in terms of debt-to-GDP, and without meaningful policy modifications, debt obligations are expected to rise further.
At the same time, deglobalization remains an influential factor. Trade policy, domestic politics, and geopolitical tensions, along with the potential re-emergence of frozen conflicts, are creating persistent uncertainty.
Against this backdrop, investors are debating whether the combination of AI innovation, fiscal support, and easier monetary policy could help the economy break out of the traditional cycle of slowdowns and recoveries.
AI is seen as a potential catalyst for long-term productivity gains, though actual outcomes will depend on investment, regulation, and the energy capacity needed to support rapid adoption.
On the other side, the pace of AI development is making investors nervous, according to Orlando Bravo and Bloomberg. He describes the anxiety in private markets as “enormous,” driven by uncertainty over which AI companies actually have staying power.
Firms are scrambling to pick winners, and the fear of missing out is leading some to take risks they may later regret.
📄 Interview | How Schroders Capital Is Bringing Flexibility and Simplicity to Private Markets
As private equity firms work through a year of tighter liquidity, slower fundraising, and more pressure from LPs, one theme keeps coming up again and again: flexibility. With distributions still lagging and many investors wanting more control over their pacing and liquidity, the industry is starting to rethink how capital is structured and deployed.
The search for flexibility is exactly why alternatives to the classic closed-end model are gaining momentum. In our recent interview with Luigi Croce from Schroders Capital, he explained how semi-liquid and evergreen funds are becoming a practical tool for LPs who want quicker deployment, smoother exposure, and more predictable liquidity.
These vehicles won’t replace traditional funds, but they’re becoming an increasingly important part of the toolkit, especially in a year when capital calls, exits, and portfolio pacing look very different from earlier cycles.