Private Equity Pulse: key takeaways from Q3 2025

At the same time, firms are increasingly deploying creative structures — such as earnouts, tariff-related material adverse change (MAC) clauses, and other contingent mechanisms — to mitigate risk and progress deals in uncertain environments. This flexibility has allowed sponsors to maintain transaction momentum even as long-term macro questions remain unresolved.

Financing conditions have also improved notably. Direct lenders remain highly active, offering competitive pricing and flexible structures, while the broadly syndicated loan market has reopened for larger buyouts. In the US, for example, syndicated loan activity surged to US$404b in Q3, the highest on record, according to Pitchbook LCD, underscoring the renewed confidence of both borrowers and lenders.

Sector reallocations underway

Q3 brought a measure of sector rotation, a shift that wasn’t unexpected given the tariff announcements earlier in the year. Investors responded by channeling more capital toward industries viewed as less exposed to trade frictions and more resilient to macro uncertainty. Allocations to health care and financial services have more than doubled year to date and by contrast, technology — long the dominant destination for private equity capital — saw only a modest 5% rise in deployment compared with last year. The result is a clear pivot toward infrastructure, health and other essential services — sectors where stable demand and domestic exposure provide insulation against external shocks.

A promising trend has been the gradual reemergence of the PE-backed IPO market. After two years of muted activity, Q3 saw a number of high-profile listings come to market, together raising more than US$18b in aggregate proceeds. While modest compared with the pre-2021 boom years, these offerings are meaningful in signaling that public market investors are once again open to new issuance from PE portfolios. Notably, successful debuts have been concentrated in sectors with clear growth narratives and resilient earnings profiles, such as health care and financial infrastructure.

As fundraising slows, regulatory changes could yield meaningful longer-term tailwinds 

As exit activity begins to show signs of life, attention naturally shifts to fundraising, where the environment remains more challenging. Through the first three quarters of 2025, private equity firms have raised approximately US$340b, putting the industry on pace for a roughly 25% decline versus last year. The slowdown reflects both a more measured pace of capital deployment by LPs and lingering caution around distributions. 

However, recent changes to US retirement law allowing private equity and other alternatives to be included in 401(k) plans could provide a powerful new tailwind for capital formation. With roughly US$9t currently held in defined-contribution plans, even a modest allocation could translate into US$500 to US$600b of incremental flows into private markets over time. 

Private equity firms are paying attention — in our latest survey, 90% of GPs say they’re at least “somewhat interested” in developing products for the defined contribution market. And a significant minority — 24% — report that they are already actively designing or developing such products.