Private Equity 2025: Navigating Growth, AI, and Resilience

Private equity has cemented itself as one of the most influential forces in global investing. Over the past 15 years, it has transformed from a niche asset class into a cornerstone of institutional portfolios, delivering scale, diversification, and long-term value.

Global private markets AUM (including PE) reached $13–14 trillion by mid-2025, up from about $3–4 trillion in 2010, reflecting an impressive 11% CAGR over the period (McKinsey). Among alternatives, PE continues to capture a growing share of capital, fuelled by institutional demand and the search for yield.

Although PE AUM dipped slightly in 2024 (~1.4%) due to weaker exits and distributions, buyout AUM has expanded substantially, supported by private equity fundraising momentum and strong private equity value creation strategies. Annual fundraising surged to a peak of $1.8 trillion in 2021, before moderating to $1.1 trillion in 2024, a ~40% drop but still well above pre-2020 levels.

As of mid-2025, with private equity deal activity rebounding (up 30% in Q2 2025) and dry powder exceeding $1 trillion, private equity remains resilient, adapting to inflation, geopolitical uncertainty, and higher rates while focusing on technology, ESG in private equity, and operational excellence.

Why Private Equity Remains a Cornerstone in 2025

Private equity continues to provide institutional investors with scale, diversification, and long-term returns. Its ability to rebound from market volatility while adapting to new strategies makes it indispensable in global portfolios.

How Is the Private Equity Landscape Evolving in 2025

• Macro & Monetary Trends: Rising rates between 2022–2023 (over 500 bps in the U.S.) dampened dealmaking, but subsequent monetary easing has revived M&A momentum. Still, inflation fears and tariff risks loom large.
• Regulatory Complexity: U.S. policy swings (tariff war, shift away from ESG mandates) and reforms in India (RBI fintech SROs, SEBI norms) are reshaping compliance and governance.
• Tax Reforms: U.S. changes such as P.L. 119-21 are influencing deal structuring, favoring C-corp models and R&D-intensive sectors.
• Geopolitical Risks Impacting Returns: Currency depreciation in emerging markets, notably INR hitting 87.5/USD, is eroding dollar returns.

How AI Is Powering Private Equity Transformation

Private equity and AI are increasingly inseparable. Firms are using artificial intelligence to transform operating models:

• Generative AI is enhancing deal sourcing, due diligence, and portfolio monitoring, cutting costs and improving decision speed.
• In-house data science teams and AI partnerships are scaling private equity transformation.
• Sectors like technology, industrials, and fintech are at the forefront of this digital shift.

In short, AI has become a strategic differentiator, enabling firms to sustain performance despite macro headwinds

Core Segments of Private Equity

Venture Capital – Igniting Innovation:

Venture capital continues to drive disruptive innovation. In 2025, AI and biotech dominate portfolios, with VC-backed firms raising over $80 billion in Q1 2025. Yet tighter funding conditions mean startups must show revenue traction to secure capital.

Growth Equity – Scaling with Strategy:

Growth equity balances risk and return, offering more stability than VC but greater upside than buyouts. Mega-rounds in 2025 highlight private equity growth strategies, with sectors like SaaS and fintech leading the charge.

Buyouts: Driving Control and Efficiency:

Buyouts remain the anchor of PE portfolios. Modern deals emphasize operational excellence, digital adoption, and private equity value creation over pure leverage. Recent mega-deals reinforce buyouts’ role in shaping mature businesses.

Private Equity Outlook 2025: Reinvention and Resilience

The private equity market outlook remains strong. Despite inflationary pressures and policy uncertainty, firms are finding ways to balance risk, return, and innovation. Private equity resilience is evident in its ability to rebound from fundraising declines and adapt strategies to sustain long-term growth.

Ultimately, PE in 2025 is about reinvention. While VC fuels innovation, growth equity accelerates scale, and buyouts drive transformation, all strategies are converging around ESG in private equity, AI adoption, and operational excellence. Operational excellence also relies on fund accounting services that deliver automation-driven accuracy, NAV reporting, and investor transparency. As global markets evolve, PE’s ability to combine transformation with resilience will define its role as a pillar of institutional portfolios.

FAQs:

What change will AI bring to private equity?
AI will transform private equity by automating deal sourcing, speeding due diligence, and enhancing portfolio monitoring. Generative AI reduces manual effort, improves decision-making speed, and helps firms unlock deeper insights for value creation.

How is AI used in private equity deal sourcing?
AI algorithms scan market data, company filings, and alternative data to identify high-potential targets faster than traditional methods. This allows firms to evaluate more opportunities with greater accuracy.

Where does AI add the most value in private equity operations?
AI adds the most value in due diligence, risk analysis, compliance monitoring, and portfolio performance tracking. It enables firms to detect red flags early and optimize operational efficiency.

How does Decimal Point Analytics support private equity firms?
Decimal Point Analytics (DPA) helps private equity firms by integrating AI-driven analytics, custom dashboards, and automated data pipelines. This reduces reporting times, improves governance, and provides sharper insights for investors and portfolio managers.

Why partner with DPA for private equity AI solutions?
DPA combines deep fund research expertise with AI, BI, and automation to deliver actionable insights. Our solutions unify fragmented data, embed ESG metrics, and empower decision-makers to balance risk and returns with confidence.