Before starting the discussion at a Paperjam Club private equity roundtable, held on Wednesday, Aïssata Coulibaly, partner at Deloitte and co-moderator of the event,  set the scene by reporting that the private equity sector was marked by $565bn in deals in 2024. That’s a 25% increase over 2023.

Coulibaly expects three main trends for 2025: First, there should be “a little bit more clarity when it comes to the macro environment.” Second, she anticipates “a large quantum of assets” to hit the market, a comment supported by data firm Pitchbook, which reported that 40% of the funds’ assets have been sitting in portfolios for more than four years. “This will definitely trigger an increase in exit strategies.” Finally, she remarked on a narrowing gap in valuation between buyers and sellers. It will therefore not be a surprise that general partners are expecting “an uptick in the IPO activities.”

Key takeaways from the private equity roundtable

Aïssata Coulibaly: Most significant changes that you observed on the market over the past years

“I felt in the past few years, the market has been slow, long and dark… like winter in Luxembourg,” joked Miao Wang, partner a A&O Shearman. She observed three trends. The LP-GP relationship has intensified through greater focus on performance, more products designated for LPs and more sensitive fee discussions.

Second, she noted that creative measures that “started from something unexpected” have sometime then become the market norm, such as the use of preferred shares to finance the continuation structures. Finally, she specified that in the fundraising market: “size does matter.” Yet she also observed that “disciplined asset managers with clear strategy and specialised talents stood out in this environment.”

Emmanuel Rogy, chief operating officer at Cube Infrastructure Managers, affirmed that the decrease in interest rates had in the past substantially “impacted the value of the assets” in his business. In the last three years, they went back up, leading GPs to recognise a “smaller profit than expected.” As a result, many players are delaying asset sales hoping for a decline in interest rates. He added that “we need a few quarters until people finally decide to sell.”

“We’re in the business to buy assets, to transform assets and to sell assets,” said Rogy. As this is the cycle of private equity and infrastructure, “if you’re not selling, you’re not doing your job.” He warned that the current return of vintage funds will be different than the vintage funds of the past.

Sylvain Barrette: Current macroeconomic factors affecting the private investment landscape

“We have to find a way to be insensitive to changes of the macroeconomics,” including interest rates, said Rogy. He takes comfort from the inflation protection provisions for infrastructure assets. “We’re trying to offer value for LPs by identifying companies that are important and essential because they are delivering a service to the public, and that service is always there, whatever the macroeconomic.” The goal of Cube is to be at least less sensitive to interest rates.

Aïssata Coulibaly: Hottest sectors and regions that present the most promising opportunities for private investment products

Wang noted that there are “bigger deals” in the North American market, whereas European deals are coming back driven by the technology, healthcare and consumer sectors. She also noted a lot of focus on secondaries, a cyclical phenomenon as some funds may be short of liquidity while LPs are still expecting a return of capital.

“The US infrastructure is all about energy, and there is no habit of financing private infrastructure,” such as is common in Europe, stated Rogy. He noted that there is a shift from the core infrastructure to the value-added private infrastructure that is less regulated with “more growth risk,” such as temperature control logistic operators (refrigerated electric trucks) and the regulated waste management (collection, recycling, incineration) companies.

Sylvain Barrette: European long-term investment funds (Eltifs) may finally pick up flows in 2025 after a flurry of fund launches in 2024

“We had a false start with Eltif 1.0… as closed-ended funds were ultimately not very well suited for the [retail] distribution channel,” said Davide Dragoni, head of product & solution, private capital, at BNP Paribas. He noted that the first edition led to the launch of only around 40 funds, an amount that has increased to around 150 funds nowadays. He sees inflows to gain traction as more and more Eltif 2.0 are launched as evergreen funds. “It's only the tip of the iceberg.”

Wang thinks that asset managers must ask themselves the following question, amongst others, when considering the distribution of Eltif funds: “Do you have the infrastructure and the knowledge? How do you handle disclosure and potential conflict interest?”

Aïssata Coulibaly: Key rising/emerging technologies such as artificial intelligence transforming private investment

“As for any industry, we are incorporating AI to be quicker, cheaper, and more efficient,” stated Rogy. “We use AI to identify companies that we want to buy. It’s quicker, and it’s more relevant... We find targets that we hadn’t identified.”

Rogy explained that it is also an opportunity for investment in the industry when a technology must be integrated into an infrastructure asset. He cited their investment in infrastructure to monitor the flows of traffic in a city or on the time people spend in a parking lot. It may not be the expertise of a public authority, therefore, “if you bring the value, you can get paid for that value.”

Sylvain Barrette: Regulations or legal innovations to be closely watched

“I look very carefully at AIFMD, Eltif and Dora and tokenisation on the technology side,” said Wang. Current regulations may unplease some players, but Dragoni warned that a potential future liquidity crisis impacting retail investors may result in further regulation for an industry increasingly seen as systemically important.

Sylvain Barrette: Shift towards renewable energy impacting private investment strategies

“Renewable energy has become a competitive source of energy, and when you invest in a business that is competitive, your risk is down and/or your return is high.” Rogy argued that it is not only good when it comes to a reduction in the consumption of fossil fuel, but “importantly, it’s a very good investment.”

Rogy thinks that regulation plays an important role in balancing supply and demand of energy “market by market,” as it is designed to account for the short-term electricity price gyrations. “Over a period of 10 to 15 years, your return should be sufficient,” despite the daily volatility. He also thinks that “if there are too many renewables at some stage, there will be regulation to limit their installation.”

Sylvain Barrette: Other emerging trends expected to affect the private investment space within the next year or in the coming years

Dragoni not only expects retail investors to invest in evergreen funds, but also institutional players not necessarily enthused about investing in closed-end funds. He noted that some funds are designed to appeal to them specifically with rolling vintages, slow-pay shares and roll-up shares.

“We see more and more cooperation” amongst asset managers, said Wang. For instance, she sees European asset managers with a Luxembourg fund engaging US portfolio managers. “You can see a little bit of synergy between asset classes in different jurisdictions.” Elsewhere she observed industry consolidation favouring “strategic M&A,” where an asset manager may focus on a missing expertise in a niche sector.

“In times of uncertainty, there’s a flight to transparency and a back to basics. I think LPs want to understand what they buy,” affirmed Rogy. Investors are looking for the best teams in specific investment niches.