Research Report: European LPs Share Their Outlook For Private Equity
After a difficult year for private equity last year, 2025 has started with more of an upbeat tone. Deal activity picked up in the second half of the year, interest rates are coming down and even the IPO market is showing signs of life. There’s still plenty of uncertainty out there – geopolitics anyone? But at a recent event we hosted for UK based LPs, there was a healthy dose of positivity that should give GPs on the fundraising trail cause for optimism.
The discussions centred on the outlook for, and sentiment towards, the asset class in 2025 and was accompanied by a survey. Here’s a look at the key themes that emerged:
Cautious Optimism for 2025 Fundraising
LPs generally held a positive outlook for private equity fundraising for 2025, signalling an ongoing commitment to the asset class despite lingering macroeconomic concerns. Over half of respondents anticipated increasing their commitments to private equity funds by more than 5%. There was also renewed appetite among LPs to entertain new GP relationships, with a third bucking the recent trend to consolidate their GP relationships.
However, this optimism was tempered by concerns about the current year’s vintage prospects. Many LPs do not expect 2025 to be a standout vintage, instead feeling more comfortable with the return outlook for the prior two vintages: 2023 and 2024.
Shifting Sector Priorities
There was a significant shift in opinion on the most attractive sectors, with investors stepping away from the traditional strongholds of technology and healthcare, towards business services. This shift may be attributed to saturation in those popular sectors, with many sufficiently exposed and looking for opportunities elsewhere. Business services, with its broad application and resilience, may also be viewed as a relatively “safe” investment, particularly in uncertain economic conditions.
Nordics Shine
The geography-related question elicited one of the more surprising reactions, with a significant share pointing to the Nordics as their preferred destination, perhaps driven by the region’s stable economies, attractive opportunities and historical outperformance. The first pick for most of the remaining LPs in the room was either Benelux or Southern Europe.
No Slowdown in Secondaries
The secondary market looks ripe for further growth with nearly half of the LPs surveyed saying they will roll into a continuation vehicles, highlighting a growing acceptance of these structures. Interestingly, only a quarter indicated they would not participate in GP-led deals.
Overall, the discussions reflected an investor community that’s navigating a complex environment but that remains committed to the asset class. Many are keen to add to their programs and there is some indication that investors may be open to novel investment ideas and innovative products. But more liquidity coming back to programs in 2025 would make these plans much easier to enact.
