2025 Private Markets Year in Review: A $13 Trillion Industry at an Inflection Point
- Dec 28, 2025
- 6 min read
The Big Picture
Private markets emerged from a three-year fog in 2025—but into an environment of radical transformation rather than simple recovery. Global buyout dealmaking hit $2 trillion (+14% YoY), the third-most-active year on record. For the first time since 2015, distributions to LPs finally exceeded capital contributions. Yet underneath these headline numbers, the industry confronted existential questions about its business model, investor base, and relationship with regulators.
The year's defining tension: an industry simultaneously celebrating renewed dealmaking while sitting on 30,000+ unsold portfolio companies that would take eight years to clear at current exit rates. Private credit approached $2 trillion in assets—and its first real stress test since 2011. Retail capital flooded in at a 60% annual clip, even as institutional skeptics warned of structural conflicts. And AI infrastructure emerged as a potential $5-7 trillion super-cycle that could reshape capital allocation for decades.
1. The Liquidity Reckoning
What happened
The industry's "flywheel"—buy, improve, sell, return capital, raise again—ground to a historic standstill. According to McKinsey, 61% of buyout assets are now held 4+ years. Fund vintages from 2018 show distributed-to-paid-in capital of just 0.6x versus an expected 0.8x. The denominator effect left LPs overallocated, unable to commit to successor funds without receiving distributions first.
Why it matters
With $3.6 trillion worth of unsold portfolio companies and over 18,000 funds seeking $3.3 trillion globally, the math is brutal: $3 of demand exists for every $1 of available LP capital. The industry's fundamental promise—that illiquidity premiums compensate for locked-up capital—faced its sternest test as paper gains failed to convert to cash.
How managers adapted
Continuation vehicles surged to a record $47B in H1 2025 as GPs rolled assets into new structures rather than sell at discounts
NAV financing is projected to triple from $44B (2023) to over $145B by 2030
Dividend recaps returned, though 60% of LPs surveyed prefer conventional exits
GP-stake sales planned by 77% of firms (nearly double prior year)
2. Secondaries Shatter Records
What happened
The secondary market exploded from a niche liquidity tool to essential infrastructure. Transaction volume hit $160 billion in 2024—shattering all records—with $102 billion in H1 2025 alone putting the market on pace to exceed that mark. Private credit secondaries surged from $5-7 billion five years ago to $36 billion in 2024, with Pantheon deploying in six months what took all of 2024.
Why it matters
Secondaries evolved from a solution for distressed sellers to a strategic portfolio management tool. LP-led transactions reflect portfolio rebalancing needs; GP-led deals (projected to exceed LP-led for the first time) allow sponsors to extend ownership of winners while providing liquidity.
Key deals
Carlyle AlpInvest: $20B secondary investing program ($15B commingled fund at hard cap)
Blackstone Infrastructure Secondaries: $5.5B (world's largest dedicated fund)
Coller Capital Credit: $6.8B (nearly 5x its debut fund)
Ares Credit Secondaries: $3.5B+ inaugural fund
3. Private Credit's First Real Test
What happened
The $2 trillion private credit market—which has operated in largely benign conditions since 2011—faced its first significant stress test. Goldman Sachs estimates 15% of borrowers can't cover interest payments, with another 25-30% facing elevated stress. High-profile bankruptcies including First Brands and Tricolor revealed alleged fraud, with six suspected cases emerging in months.
Howard Marks' November memo "Cockroaches in the Coal Mine" crystallized concerns: First Brands disclosed $5.9 billion in debt during a July financing but actually owed $11.6 billion—a $5.7 billion gap. One creditor's lawyer said $2.3 billion had "simply vanished."
Why it matters
The industry grew explosively during a period of historically low defaults. Credit selection skills—dormant during the good years—are now essential. Blackstone's Schwarzman forcefully defended the asset class, noting its $150B direct lending platform is 95%+ senior secured with sub-40% LTV.
The counterpoint
Despite concerns, private credit remains structurally advantaged. Basel IV capital requirements continue pushing banks out of mid-market lending. Mercer's survey found 80% of managers expect GP fundraising to grow over the next 3-5 years, with 77% planning new strategy launches within 12 months. BlackRock projects the market will reach $4.5 trillion by decade's end.
4. The Retail Revolution (and Its Discontents)
What happened
Retail capital flooded private markets at an unprecedented pace. ILPA reports the segment grew at nearly 60% CAGR over four years to ~$360 billion, with PE retail vehicles up 56% in 2024 alone. Semiliquid funds hit $344 billion by year-end 2024. Then in August, President Trump signed an executive order opening America's $12.5 trillion defined contribution market to alternatives—effective August 2026.
Why it matters
The math is compelling: private markets generate roughly 4x the profit per dollar of AUM as traditional managers. With 85% of U.S. companies with $100M+ revenue staying private, and only 4,500 listed companies (down from 8,000 in the mid-1990s), retail access addresses real portfolio construction needs.
The concerns
Liquidity mismatch: Hamilton Lane assigns 75% probability that a market decline causes most evergreen funds to gate redemptions
Fee structures: Interval/tender offer funds average 3.16% annual expense ratios vs. 0.37% for passive equity funds
Conflict potential: ILPA warned retail vehicles may displace institutional co-investment opportunities
Concentration risk: Six firms (led by Blackstone) control nearly 50% of retail alternatives
5. The AI Infrastructure Super-Cycle
What happened
Artificial intelligence emerged as private markets' most significant long-term opportunity. Apollo calculates $5.3 trillion in data center commitments are expected through 2028 ($2.3T already committed this year). Blue Owl projects $7 trillion in AI infrastructure investment over the next decade—nearly 10x the $800B spent on internet fiber buildout.
The power problem
Data centers' share of U.S. electricity consumption is projected to double from 4% to 8% by 2030, then quadruple to 16% by 2040. After 25 years of flat electricity demand, the U.S. faces 40% growth through 2050. Regions like Texas and the Mid-Atlantic face structural deficits for the first time in decades.
Investment implications
Apollo's Credit Outlook notes hyperscaler capex is generating $300-400 billion in annual debt financing needs, transforming credit markets. Google could move from 212th to top-10 largest U.S. IG issuer by 2030.
6. The April Tariff Shock
What happened
April 2's "Liberation Day" tariff announcements triggered an immediate freeze. According to Bain, deal values in April dropped 24% below Q1 averages while deal counts fell 22%. The IPO market effectively shut—Klarna and others paused public offerings. Q2 global PE investment dropped to $363.7B across 3,769 deals, the lowest since Q3 2020.
The recovery
By Q3, activity rebounded sharply as policy clarity emerged. McDermott Will & Schulte reported Q3 deal values hit $310 billion—the busiest quarter since 2020. Trade negotiations provided certainty while Fed rate cuts supported financing costs.
7. Regional Dynamics
Asia: The Growth Engine
Asia drives approximately 60% of global GDP growth. The Alternative Credit Council projects APAC private credit AUM will grow from $59B to $92B by 2027 (16% CAGR). Japan saw M&A value double to $300B—its busiest year in three decades—with leveraged buyout financing at 3-4% vs. 8-9% in the U.S.
Europe: Defense and Infrastructure Reset
€150 billion in SAFE-backed loans and EIB capital is flowing into defense and security infrastructure. Public-to-private deals surged 65%. Average private credit deal size jumped 38% to €205M in H1 2025.
What Leaders Said in 2025
On the liquidity crisis:
"You can't eat IRR. You actually need capital coming back." — Alisa Wood, Partner, KKR
On secondaries as solution:
"It's like Field of Dreams—if you build it, they will come. The capability and capital now exist to facilitate liquidity transactions at scale." — Rick Jain, Partner, Pantheon
On credit quality concerns:
"The worst of loans are made in the best of times." — Howard Marks, Co-Chairman, Oaktree Capital
On private markets reshaping finance:
"Private capital assets are projected to surge from $13 trillion to over $30 trillion in the next five years." — Ted Pick, CEO, Morgan Stanley
On manager selection:
"The dispersion in returns between top-tier and mediocre private equity managers exceeds 1,400 basis points, compared to just 200-300 basis points in public equities." — Bloomberg Private Capital Leaders Panel
On deployment discipline:
"Steady deployment beats market timing." — David Sambur, Co-Head of Private Equity, Apollo
On the stakes:
"The next decade will be the most dangerous and transformational of our lifetime." — Rishi Sunak, Former UK Prime Minister, at Goldman Sachs Alternatives Summit
Outlook for 2026
The consensus view:
Deal activity accelerates as policy clarity enables transactions deferred in 2025
Credit quality diverges sharply between disciplined underwriters and those who reached for yield
AI infrastructure dominates capital allocation conversations and financing needs
Retail access expands with 401(k) integration effective August 2026
Manager selection matters more with 1,400+ bps dispersion between top and bottom quartile
The key question
Private markets have positioned themselves as essential infrastructure for the coming transformation—financing AI buildouts, defense modernization, and energy transition. The question is whether the industry can deliver returns commensurate with the complexity and illiquidity its investors accept. The firms that focus on operational improvement rather than financial engineering—and who maintain discipline when others reach for yield—will define the next generation of private markets outperformance.
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