Investec Private Equity Trends Report: Investors are optimistic

Investec Bank plc (Investec), a leading international financial services provider, today announces findings from its 14th Private Equity Trends 2025 Report, revealing that private equity professionals are expecting rising returns and larger fund sizes in 2025.

The report reveals increased optimism across the industry following a challenging period for deal-making and fundraising with private equity professionals expecting to operate in a more competitive debt market and navigate a dynamic exit landscape.  

An optimistic outlook:

The outlook for returns has improved markedly, with 79% of GPs expecting returns to rise, compared to just 24% in 2024. This optimism has extended to fundraising with 38% of respondents anticipating that their next fund will be a blockbuster increase of 25% or more. In the 2024 report, more than a fifth of respondents (21%) expected a down raise for their next fund; the 2025 research shows only 3% anticipate the same scenario.

The report also highlights how GPs are considering a range of exit strategies for portfolio companies, including trade sales, continuation vehicles and IPOs. Our survey found that 65% of the GPs who are considering an IPO as an exit over the next two years are looking at the London market.

Jonathan Harvey, Fund Solutions, Investec, stated: “This year’s findings serve as a distinctive barometer for GP sentiment going into what will be a crucial year for the industry. Despite challenges over the past few years, the industry is resilient, adaptable, and anticipates a more favourable period ahead. Our research indicates that positive sentiment is significantly up across the industry, with expectations of higher returns and larger fund sizes. This suggests that the dry powder accumulated over the last few years may be deployed into the market this year.”

GP commitments are up, debt markets are open:

The survey revealed that GPs are expecting to increase their commitments from the typical 2% to 3% with one in ten expecting a future GP commitment to be between 6% to 10% in 2025. This comes as LPs grow more selective and GPs seek to strengthen alignment with investors and boost fundraising momentum.

Meanwhile, the debt market is transforming, welcoming a significant number of new lenders to the market. Over half of GPs (54%) say they will have new lenders to work with in 2025 which marks a dramatic shift from last year’s findings, when 56% of respondents saw a contraction in new lender activity. Their hopes are that a more competitive debt market will improve borrower conditions, with 54% of UK managers reporting the expectation of either narrowing margins or the relaxation of documentary controls. Outside of the UK, however, GPs are more cautious, with only 35% forecasting looser terms.

Despite these expectations, lenders continue to exercise discipline. Well over a third of respondents (43%) reported that leverage multiples have lowered from a year ago. While interest rates have reduced, the overall cost of borrowing remains elevated, compared to recent years, making additional leverage more costly to service. Further, while debt remains available, the survey findings on leverage multiples reveal that capital structures remain relatively conservative.

Exits and innovations:

One of the most pressing challenges for private equity managers has been securing exits that effectively crystallise returns. More than half of GPs (54%) think trade sales will be the busiest exit route during the next 24 months. An IPO is also a possible exit route, with over 50% of GPs considering two portfolio companies as possible candidates for IPO over the next two years. The squeeze on conventional exit routes has meant there has been greater use of continuation vehicles, which are here to stay as a mainstream exit path: more than 40% of GPs say a continuation fund will be an exit option they are most likely to use in the next 12 months.

Jonathan Harvey, Fund Solutions, Investec, added: “While sentiment is clearly up and expectations for a positive deal environment are high, it is evident that headwinds remain. We are likely to see a pickier market as deals come under increased scrutiny, with dealmakers needing to navigate heightened levels of both geopolitical and macroeconomic challenges throughout the year.”