Navigating Private Markets into 2025: Key Themes and Takeaways from SuperInvestor

SuperInvestor, Europe’s annual fall gathering of private markets fund managers and investors, took place among the yachts and luxury car showrooms of Monaco. While there was plenty of glitz in the surroundings, the conference itself was focused on some of the grittier aspects of private markets investing. Several recurrent themes dominated the discussions – from managing liquidity in a "DPI drought" to understanding how geopolitical dynamics and market shifts will influence strategies in 2025 – while GPs and service providers networked hard and long into the evenings on the C?te d’Azur. Below are some of my key takeaways.?

Distribution pain in realizing the gain

DPI (Distributions to Paid-In) was the most used acronym of the conference, mostly by LPs in a context of pain and frustration over liquidity constraints. Understandably so, given the private capital industry has collected more from investors than it has given back in gains for six straight years, resulting in a total gap of $1.56 trillion. In the context of a weakened IPO market and limited M&A exit opportunities, GPs discussed the innovative solutions they’ve developed to manufacture liquidity. Panellists highlighted options such as semi-liquid structures, secondaries transactions and NAV financing, but were quick to note these should be treated as the exception not the rule since they only partially address the liquidity issue. The potential for “private IPOs” or liquidity windows for large private firms is another approach on the radar of GPs aiming to balance liquidity needs without going fully public.

The scarcity of exits is also pushing LPs to rethink their allocations. Some have pivoted towards private credit for higher yield, mid-market funds for more favorable exit conditions, secondaries transactions for some liquidity relief, or – to the dismay of many in the room – paused altogether on new commitments. However, the pressure to unlock liquidity was undeniable, especially for LPs with reinvestment goals dependent on regular distributions.

Flight to quality or familiarity; Middle East shines

With PE funds now taking an average of 18 months to close, smaller and emerging managers are bearing the brunt of the slowdown. Capital is concentrated among the top managers as LPs opt to extend their re-ups rather than committing to new funds. Emerging managers are on track for their lowest fundraising figures in a decade. Panellists asked: Clearly there is a flight to familiarity and size, but what about quality? They encouraged investors in the room to look beyond the big names and find those with a contrarian – well differentiated – approach.

Pitchbook went on to provide a geographic split of fundraising data. European and US markets remain central – though another Trump win in the US, which was declared on the first morning of SuperInvestor, has both GPs and LPs preparing for potential shifts in the tax and regulatory environment that could impact everything from capital gains rates to ESG-related policies. The Middle East though has been growing rapidly. Significant growth in its private capital ecosystem is being fueled by sovereign wealth funds and family offices actively deploying capital into private equity and private credit opportunities. For LPs, these geographic shifts in capital allocation underscore the importance of a diversified approach. Meanwhile, many LPs remain cautious, earmarking capital for impact investments or lower-to-mid-market funds with less reliance on macro-driven returns.

Mid-Market’s growing appeal: Kissing frogs and finding the real deal

While the larger buyout funds continue to brave a "distribution winter", mid-market funds are enjoying milder temperatures. The middle market is the subject of plenty of interest for its unique advantages: lower acquisition multiples – around 1.5x lower than large-cap deals – reduced leverage, deeper sector specialization and operational expertise to drive EBITDA improvements and multiple expansion, meaning potential for higher returns without reliance on IPO exits. Estimates of the segment’s outperformance compared to the large-cap market hover around 250-300 basis points on average.

Indeed, the mid-market makes up a significant portion of commitments for the panellists, at around 60-80% of their annual allocations.

Still, the mid-market is not without its challenges, requiring “harder work" to source and diligence opportunities, followed by active management to unlock the company’s long-term potential and create value that significantly enhances returns upon exit. For LPs, finding the right GP with a solid track record in this segment is essential. Mid-market funds often come with heightened "key person" risk, emphasizing the need for strong team dynamics and alignment of interests. For GPs, the challenge lies in finding the “hidden gem” companies in the vast mid-market universe. An open-funnel approach should be taken, panellists agreed, and many frogs may need to be kissed before prince potential comes along. And when it does, the GP must assert the right to win through a clear and compelling story of their vision and what makes them unique – whether that’s true sector specialisation or real operational value-add.

Resilient sectors: Private Credit and Secondaries

Private credit continues to surge, capturing attention as a reliable alternative to traditional leveraged buyout (LBO) financing. Private credit now supports nearly 80% of LBO transactions, and its appeal has extended beyond institutional channels to include high-net-worth (HNW) individuals, the conference heard. The sector’s growth has largely been driven by its yield generation and relatively stable performance flows amid broader market volatility.

Secondary funds have also seen increased capital flows, driven by a need for liquidity and the opportunity to avail of J-curve mitigation and vintage year diversification. For the private wealth channel, both sectors are shaping up to be favorable entry points into private markets.

Panellists discussed ongoing innovation to target the wealth market, with evergreen or semi-liquid funds noted as increasingly popular structures. Individual investors of course like the flexibility of evergreens, which offer better liquidity than drawdown funds, but they should be careful as these structures are not fully liquid. Still, for private wealth investors, this is a reasonable compromise for a foothold in the private markets.

We’ve been through the worst, the pain is fading away

This was the general feeling in the room. Despite current constraints, there is cautious optimism about a recovery in PE dealmaking, spurred by easing benchmark rates and a favorable spread environment. Higher multiples across private market transactions are anticipated to prop up the exit market. Yet, while these conditions might help facilitate strategic exits, they make it tougher for GPs to rely on multiple expansion during the hold period. The consensus remains that investors will not be backing those GPs where they have concerns for example around valuations of portfolios. Any lack of clarity is further compounded by the huge volume of assets that remain unrealised, making it difficult for investors to judge the performance of the manager.

The shifting deal dynamics suggest that GPs must rely increasingly on operational improvements and sector-specific expertise to generate value. This emphasis on operational strategy may further widen the performance gap between specialized, mid-market-focused funds and larger, more generalist PE firms.

Planning for 2025 and beyond: The importance of adaptability

As private capital is set to rise to $20 trillion by 2028, there is significant innovation encompassing everything from products and strategies, to the use of technology and AI for deal sourcing, asset management and operations. Meanwhile, there are new types of investors eyeing the asset class. With a renewed emphasis on quality, managers are looking to balance investor demand for liquidity with the discipline of long-term value creation, all while navigating a complex geopolitical and economic environment.

What is also clear is that they will need to offer well differentiated solutions and brush up their storytelling to do them justice. For example, in an exit starved environment, can they show their success in getting exits done, or explain how they’re returning capital to investors? Or how a mid-market manager’s origination model is optimised for efficiency, with proof points to back it up. From a communications and branding standpoint, there’s plenty of possibility – and much work to be done.