The private market experienced dynamic shifts across deal stages, industries, geographic distribution, and asset classes in 2024, setting the stage for continuing deal activity and new exits in 2025. Changing economic conditions and regulatory environments may fuel momentum. An ongoing capital supply-demand imbalance could impact valuations. Persistently long holding periods and slow exit activity are expected to relax in 2025, but continue to shape fund life cycles and investor returns.
In 2024, this fluctuating capital environment prompted the emergence of innovative alternative asset classes. Wealth advisors moved more of their clients' assets into alternatives, diversifying portfolios well beyond the traditional 60/40 mix. There is every reason to believe that the private market momentum will continue in 2025, particularly as innovative assets like Evergreen funds and private credit open access to growing numbers of individual investors.
Venture capital and private credit funds played essential roles in building startup valuations and investor portfolios, reinforcing the potential of private market funds. Some challenges persisted in 2024 and could linger in 2025, including deal consolidation and an abundance of dry powder. Still, even these issues are contributing to higher quality, more resilient investment opportunities.
Top-performing venture capital funds demonstrated resilience despite lingering macroeconomic uncertainties and industry contraction in 2024. Mega-investments in artificial intelligence (AI) drove most capital improvements as other sectors saw stagnant or declining capital and deal counts. In 2024, in the U.S., AI-related ventures accounted for 46.4% of total VC deal value and 28.9% of deal count. [2025 PitchBook-NVCA Venture Monitor First Look] Globally, those figures were slightly lower – with AI capturing 37% of venture funding and 17% of deals. [CBI State of Venture Global 2024 Recap] Total annual AI investments in the U.S. reached $97B across nearly 4,000 deals.
The challenges of the past few years have honed the venture environment and improved the quality and resilience of companies, portfolios, and funds. Looking at 2025, analysts are watching a few trends:
Over the past couple of years, private credit has become a standout asset class. With equity-like returns and expected average yields ranging from 8% to 20%, private credit can offer a mix of performance and flexibility. With those benefits comes elevated risk, including leverage and lack of standardization. [PitchBook, "2025 to be a 'Goldilocks year' for private credit"] Still, analysts expect private credit will play an increased role in private market portfolios in 2025 for various reasons, including:
In 2024, the traditional 60/40 (stock/bond) portfolio balance continued to evolve toward a 50/30/20 (stock/bond/alternatives) mix as 92% of wealth advisors integrated alternatives into client investment portfolios. Most of these advisors (76%) allocated more than 5% to alternatives in their client portfolios – half of those advisors allocated more than 10%, and about one in 10 allocated more than 25%. The percentage allocation aligns with the investor profiles – clients with higher accreditation levels (i.e., qualified clients and qualified purchasers) tended to invest a higher percentage of their portfolios in alternatives.
For many investors, access and qualification have been hurdles to integrating alternatives. As more investors have sought to bypass these barriers, Evergreen fund adoption grew faster than almost any other alternative type. [CAIS-Mercer Alternative Investment Survey] These vehicles are open to accredited investors and offer lower minimums and more flexible investment schedules, making them a pathway into alternatives for individual investors who otherwise cannot access the private markets.
Analysts are debating and waiting to see whether we are moving into a healthier venture environment or if improvements were anomalies brought on by AI. Generally, they expect that 2025 fundraising activity should surpass 2024 levels. More IPOs could boost exit values and increase distributions and liquidity for investors. Late 2024 rate cuts, steady 2.5% GDP growth, relatively low unemployment levels, and healthy corporate earnings could also contribute to a general sense of economic optimism that could improve consumer confidence and investment activity. There is every reason for well-informed, well-prepared fund managers and startups to go into 2025 with measured optimism, if for no other reason than that the challenges of the past few years have honed the private market and venture-backed startups to support those that have proven their capacity for resilience.
This report is compiled from FY 2024 and 2025 projection reports from PitchBook, NVCA, CB Insights, and CAIS. Some discrepancies in deal counts and value data exist between analysts. We have provided a recap of data from PitchBook and NVCA.
📧 Subscribe to the BIP Capital LinkedIn Newsletter for monthly content and updates.
