Private Markets Navigate Tariff Headwinds as Exit Timelines Extend | Weekly Pulse

Must Know: Private Equity Firms Shift to Survival Mode as Exits Stall

The Bottom Line: Firms are prioritizing portfolio preservation and creative liquidity solutions as the extended exit timeline threatens fundraising and investor relationships.

📊 Why It Matters:

• 12,000+ companies remain in PE portfolios with 3,800+ held for 5-12 years

• Nearly 60% of long-held portfolio companies have significant tariff exposure

• Distribution yields at or near all-time lows with further deterioration expected

• New investments are outpacing exits at an unsustainable 3-to-1 ratio

🔍 The Big Picture: As exit timelines continue to extend due to market volatility, private equity firms are focusing on stabilizing existing investments while developing alternative liquidity paths for investors. Firms with diversified strategies across credit, secondaries, and infrastructure are showing greater resilience than pure-play buyout shops in this challenging environment.

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💹 By The Numbers: Key Metrics Shaping Private Markets

• $3 trillion: 💰 Projected size of private credit market by 2028, roughly double current levels

• $83 billion: 🤖 AI investments in 2024, soaring 70% year-over-year

• €21.5 billion: 🏗️ EQT Infrastructure VI fund closing, exceeding its €20 billion target

• $4 billion: 💸 Matched exit and investment activity by EQT in Q1 2025, demonstrating balanced capital deployment

• $1.2 trillion: 📈 Blackstone's assets under management, up 10% year-over-year

• $50+ billion: 💼 Secondary market for venture capital exits, providing crucial liquidity amid IPO drought

• €142 billion: 💵 EQT's fee-paying AUM, providing stable management fee revenue

• 340-500 bps: 📉 High-yield spread expansion over five trading days following tariff announcements

• $682,000: 💼 Average partner payout at Grant Thornton UK after Cinven buyout

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🌎 Market Spotlight: Regional Developments

🇺🇸 United States: Trump's "Liberation Day" tariffs have significantly increased global recession probability to 30% (up from 20%), though credit markets show greater resilience than equities, with a temporary 90-day pause on most tariffs announced.

🇬🇧 United Kingdom: Accounting firm restructuring accelerates with Grant Thornton completing Cinven buyout and MHA floating on London's AIM, showcasing different approaches to capital access.

🇪🇺 Europe: EQT reports solid fundraising momentum despite market volatility, with

Infrastructure VI closing at €21.5 billion and BPEA IX progressing toward its $12.5 billion target.

🇨🇳 China: 125% tariff remains in place despite other reversals, creating distinct winners and losers in credit markets, with domestic-focused sectors showing resilience while import-dependent businesses face pressure.

🇲🇪 Middle East: KKR names retired general David Petraeus as chair of its expanding Middle East business as sovereign wealth funds worth an estimated $5.4tn seek to channel investment toward domestic economies.

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🤝 Deal Spotlight: Transactions & Strategies

🏦 Barclays/Brookfield: Barclays strikes deal with Brookfield Asset Management that could see the private equity firm become the majority owner of the bank's payments business over a seven-year timeline.

💰 SoFi/Fortress: SoFi secures $3.2 billion in new commitments from Fortress Investment Group and Edge Focus to originate personal loans, with $2 billion from Fortress extending previous arrangements.

🤝 CVC/Golub Capital: European buyout group CVC explored acquiring $75bn private credit lender Golub Capital, underscoring the continued consolidation in private credit as smaller firms seek to compete with giants.

🏦 Vanguard/Blackstone: Vanguard partners with Wellington Management and Blackstone to develop multi-asset investment solutions combining public and private markets, challenging BlackRock's aggressive expansion.

💵 Generali/Partners Group: Generali Investments and Partners Group are launching a $1 billion private credit secondaries fund targeting institutional investors in Europe, the Middle East, and Asia.

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💵 Fundraising Focus: Capital Formation Across Strategies

🏗️ Infrastructure Success: EQT Infrastructure VI closed at its hard cap of €21.5 billion, significantly exceeding its €20 billion target, demonstrating strong investor appetite despite market uncertainty.

🧠 AI Dominance: AI investments captured 46% of primary venture deal value and 26% of secondary volume in 2024, with per-employee valuation at late-stage AI companies rising to $320,000 from $220,000 in 2023.

🔄 Secondary Markets: VCs see secondary market topping $50B as the exit drought persists, though still representing just 2% of the $2.9 trillion unicorn ecosystem with 3.6% of unicorn stakes estimated viable for trading.

💸 Private Credit Acceleration: Private credit market projected to reach $3 trillion AUM by 2028, roughly double current levels, with BlackRock, TPG, and Brookfield acquisitions consolidating the industry.

🏦 Evergreen Expansion: EQT launched Nexus Infrastructure, its third evergreen strategy, expanding product offerings for private wealth clients as competition for retail investors intensifies.

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🧠 Industry Insights: Strategy & Outlook

🛡️ Valuation Practices: FCA finds significant gaps in private market valuation controls, with only 48% of portfolio companies regularly discussing culture at board meetings despite 88% claiming it provides competitive advantage.

🔄 Leadership Alignment: PE firms and portfolio companies show critical misalignment with 41% of PE executives concerned about portfolio leadership quality versus just 13% of portfolio company leaders.

🌊 Market Volatility: Recent tariff announcements have created a multi-layered market challenge through higher inflation expectations, supply chain disruptions, and renewed economic uncertainty.

💼 Manager Selection: Widening performance dispersion between top and bottom-performing managers is creating greater urgency for investors to be highly selective, with a 14% historical gap in returns.

🏭 Sectoral Impact: Companies with 70-90% reliance on Chinese imports face crisis conditions, while domestic-focused sectors like cable, telecom, healthcare, and software businesses are weathering the storm better.

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🌪️ Market Spotlight: Tariff Turbulence

🇺🇸 United States: Private equity firms face a "perfect storm" as Trump's tariffs trigger market volatility, with shares of major players down 20%+ this month despite the 90-day pause on most duties. Deal activity has ground to a near standstill as exit timelines extend and fundraising pressures mount.

🏦 Deal Drought Intensifies: Private equity firms are struggling with a massive backlog of 12,000+ portfolio companies, with nearly 3,800 held for 5-12 years. Investors are receiving distributions at the slowest pace in over a decade, with many firms turning to continuation vehicles and other creative liquidity solutions.

💰 Secondary Surge: Secondary market transactions reached $162 billion in 2024 (up 45% from 2023), as investors seek liquidity alternatives amid exit challenges. Jefferies reports this represents a 23% increase from the previous record of $132 billion set in 2021.

💼 Institutional Investors Pull Back: Major Canadian and Danish pension funds are pausing or reassessing U.S. private market investments due to geopolitical tensions and economic uncertainty. CPPIB and others are taking a "wait and see" approach before committing fresh capital.

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💡 Industry Insights: Adapting to Uncertainty

🛡️ Opportunity in Crisis: Despite market turmoil, Blackstone sees buying opportunities with $177 billion in dry powder ready to deploy. President Jonathan Gray noted, "When stock prices trade off, the receptivity from boards to our prices may be better."

🏭 Supply Chain Scrutiny: Private equity portfolio companies with significant import exposure (nearly 60% of aged holdings) face heightened tariff risk. Bain Capital and others are advising portfolio companies to reassess supply chains and prepare contingency plans.

🔄 Creative Solutions: Unable to sell portfolio companies at acceptable valuations, firms are increasingly turning to NAV financing, continuation vehicles, and minority stake sales to generate liquidity for LPs while buying time for market conditions to improve.

🌐 Geographic Pivot: As U.S. deal uncertainty persists, PE giants like Brookfield ($8B private equity portfolio in Middle East) and KKR (appointed David Petraeus as Middle East chairman) are accelerating expansion into regions less affected by tariff volatility.

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👀 Trends to Watch

📊 Supply-Demand Shift: Fundraising, deal activity, and exits have slowed, creating more favorable entry points for investors with dry powder to deploy.

🏠 Domestic Focus: Geopolitical tensions make domestic-focused assets particularly valuable as insulation from trade conflicts, resulting in premium valuations.

💳 Bank/Non-Bank Partnerships: Financial technology companies increasingly turn to private credit lenders to offload consumer loans as traditional banks reduce capital-intensive lending.

🔄 Ownership Restructuring: UK accounting firms follow US counterparts by seeking alternative ownership structures that allow partners to cash out stakes or attract external growth capital.

💼 GP Stakes Growth: Middle-market asset managers ($50-500M enterprise value) represent compelling opportunities for GP Stakes investors, with total market expected to reach $12-13B in three years.

🎯 Tariff Navigation: Companies are recalibrating supply chains and pricing strategies to mitigate tariff impacts, with import-dependent businesses facing significant pressure.

🧩 Private/Public Integration: Major initiatives like Vanguard's partnership with Blackstone aim to create seamless integration of public and private market exposure in simplified investment products for retail investors.

🌍 Sovereign Pivot: Major pension funds and institutional investors are increasingly looking to Middle East and Asia for more predictable returns and to mitigate geopolitical risks tied to U.S. investments.

🧩 Healthcare Scrutiny: State-level legislation targeting private equity healthcare acquisitions is gaining momentum, with New Mexico and Massachusetts implementing stricter review processes for hospital takeovers.

💳 Retail Democratization: Private market giants are aggressively targeting individual investors, with Blackstone reporting $11B in private wealth inflows in Q1 (highest in three years) and launching its fifth retail-focused product.

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📜 Quote of the Week

"Our experience through many economic and market downturns has taught us some of the best times to deploy capital are in a risk-off world when sentiment is most negative." - Stephen Schwarzman, Blackstone CEO