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The 2025 McKinsey “Global Private Markets Report: Braced for shifting weather” underscores a bifurcated landscape in private markets. On one hand, fundraising (especially for closed-end vehicles) collapsed—with traditional commingled private equity funds down roughly 24% year-over-year and real estate strategies plunging nearly 28%—reaching multi-year lows. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report.?utmsource=openai)) Despite this, capital deployment rebounded sharply across asset classes, with infrastructure and private debt leading the way. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report?utmsource=openai)) This suggests that although investor commitment capital has cooled, deal activity is being driven by available dry powder and sturdier financing environments.
Private equity specifically appears to be emerging from a period of dormancy. Key indicators include distributions exceeding contributions—the first occurrence since 2015—indicating LPs are finally getting liquidity. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report.?utmsource=openai)) Deal volumes in buyouts over US$500 million rose, entry multiples ticked up, and exit activity revived. Although financing remains more expensive than before, easing from peak rates has reduced pressure. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report.?utmsource=openai)) Nonetheless, PE remains uneven—particularly venture capital, and regional variability stands out, with Asia lagging behind North America and Europe. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report.?utmsource=openai))
Real estate solutions face a more mixed recovery. While deal value globally rose roughly 11% in 2024 due to sectors such as industrial and multifamily benefiting from lower supply and rate cuts, returns remain negative overall for many core/open-end strategies (e.g. pooled IRR of –1.1% and –1.6% for certain fund types). ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report?utmsource=openai)) Fundraising for real estate dropped significantly; debt-focused funds saw the steepest declines. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report?utmsource=openai))
Private debt and infrastructure both present stronger tailwinds. Private debt fundraising fell (~22%) but less sharply; direct lending and other substrategies continue to attract LP interest, particularly due to their risk position in capital structures and capacity to address refinancing waves in 2026–27. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report?utmsource=openai)) Infrastructure saw fundraising decline (~15%) but capital deployment rose ~18%, supported by megatrends—energy transition, trade logistics, population growth—and dry powder is gradually drawn down. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report?utmsource=openai))
Across all asset classes, strategic dynamics are shifting. LPs are reclassifying metrics—DPI (Distributions to Paid-In Capital) is becoming far more critical. GPs are innovating vehicle structures (evergreen, continuation vehicles), expanding GP stakes and secondaries markets, and exploring non-institutional investor pools. ([mckinsey.com](https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report.?utmsource=openai)) There is also a clear tilt toward developed markets over emerging ones, described in surveys by multiple institutions. Quality (as defined by stable cash flow, defensible market position, regulatory/or geopolitical resilience) is in ascendance. ([investors.statestreet.com](https://investors.statestreet.com/investor-news-events/press-releases/news-details/2025/The-Retail-Revolution-Will-Drive-50-of-Private-Market-Flows-by-2027–State-Street-Private-Markets-Survey/default.aspx?utmsource=openai))
Strategic implications for investors and GPs include: ensuring liquidity and exit readiness as exit backlogs remain high; tightening underwriting to manage interest rate and inflation risk; investing into operational and tech capabilities (especially around AI) for value creation; diversifying geographically but with caution; and repositioning portfolio allocations toward asset classes with clearer return paths like infrastructure, private credit. Open questions include: how durable rate reductions will be; whether real estate returns will stay below water over time; how GP share consolidation and GP stakes strategies will impact fee structures; whether ESG/regulation/trade policy shocks will differently affect asset classes; and if LPs will accept longer liquidity horizons in the face of exit and valuation pressure.
