Despite a challenging market, private equity still has much to offer – especially to investors with access to the most compelling opportunities. Here, our private equity experts explore how private equity and venture capital markets are evolving in Europe and highlight the key investment trends ahead.
The global private equity market has recorded stellar growth in recent years. Total assets under management rose from USD 2 trillion a decade ago to USD 6 trillion at the end of 2023 and are forecast to double again to USD 12 trillion by the end of the 2020s.1
However, interest rate increases in 2022 and 2023 have been followed by renewed uncertainty over global commerce, especially after US President Donald Trump’s ‘Liberation Day’ plans to impose wide-ranging tariffs on major trading partners.
Data published by Bain & Company in early 20252 indicate that fundraising across private asset classes as a whole fell by 24% in 2024, while global private equity fundraising declined by 11% over the year. Figures for the first three months of 2025, meanwhile, suggest both fundraising and dealmaking remain subdued.
“The steep central bank interest-rate rises of 2022 and 2023 were a gamechanger for private assets,” says Damien Fournier, Co-Head of the Agility Co-Invest 2 strategy.
“This has led to less availability of finance, fewer transaction buyouts, lower levels of distributions among investors and, as a consequence, less fundraising. In these conditions, demand for capital from [general partners] is outstripping supply. In Europe at the moment, it is estimated that there are three euros of capital demanded for every one euro of supply across private assets.2”
Potential impact of tariffs and slowing global trade
Investors in private equity have become increasingly concerned about the ramifications of President Trump’s tariffs, says Lionel Gomez, Co-head at Agility Co-Invest 2. “When we make investment decisions, we systematically take into account political issues. Around the time of ‘Liberation Day’, we had a number of requests from investors about the potential impact on our existing portfolio.”
As a pan-European strategy, however, the potential first-order impacts are likely to be limited, Gomez says. “It is worth noting that, from the point of view of European firms, only around 3% of European GDP is directly exposed in terms of exports of goods to the US. And 85% of the European Union economy is made up of services, which are not affected by the US tariffs.”
Instead, tariffs and geopolitical concerns can boost the European private equity market in the short to medium term. “We have seen an increased interest in Europe from investors over the last few months as a result of three main drivers. The first is the predictable and stable political environment. The second is the radical change in fiscal policy, with European governments – most notably, Germany – planning a huge increase in infrastructure and defence spending.
“The third is the fact that the European Central Bank has now made seven interest-rate cuts since June 2024. This means that Euribor, the reference rate used for any leveraged buyout transaction, has fallen below 2% for the first time in several years.” The equivalent rate in the US stood at over 4% in June 2025.
Areas of resilience and new opportunities in private equity
While overall private equity activity has been under pressure for the past three years, there have been pockets of resilience. “The current environment is especially challenging for new managers and first-time funds,” says Fournier. “But there have been some winners, not least secondary funds, where managers have been able to deploy capital with attractive conditions in terms of valuations.”
In the venture capital sector, “There has been a real difference in terms of fundraising ability when it comes to managers who display experience in the asset class and a strong track record. Demand remains strong across areas such as climate tech, with increasing interest emerging around the topics of sovereignty and defence, including areas like energy independence and cybersecurity. With valuations down in comparison to 2021, the investment environment is right for funds with dry powder.” says Laura Wirsztel, partner at the BNP Paribas Solar Impulse strategy.
While the European venture capital market is still less developed than America’s, there is an opportunity for Europe to catch up and create truly global technology businesses as a result of the uncertainties in the US.
Ongoing volatility has stimulated interest in private equity infrastructure investments. “The asset class offers defensive characteristics and, more importantly, an element of downside protection,” says Rodolphe Brumm, Head of the Investment Team for Private Equity Infrastructure.
“Infrastructure has been built around offering essential services with monopolistic characteristics. It provides high visibility on cash flows and protection against inflation for stakeholders.”
A significant proportion of activity in the energy transition is driven by companies that are smaller, more entrepreneurial and more agile. So, private equity investments in the mid-cap space should offer considerable appeal for investors.
Overcoming current challenges in private equity
Prevailing trading conditions in private equity mean it is very much a buyer’s rather than a seller’s market. Fund managers in the sector are reporting a significant backlog of companies waiting to be sold.
“However, we believe it is a positive sign that [general partners] are disciplined and are not rushing to exit or invest,” says Arnaud de La Bigne, Investment Director, Fund Platform. “They are being cautious, but the big question mark is around how long the current uncertainty will prevail.”
These challenges only serve to underline the importance of high-quality deal pipelines and strong origination networks. “We have a spectrum of sources for origination,” says Brumm.
“We have strong personal networks enabling us to originate a large number of transactions. Obviously, we are part of BNP Paribas, which is one of the largest banks in Europe. That provides us with a lot of opportunity. The group is involved in terms of advising companies looking to raise money for the energy transition, for example.”
Fournier highlights the advantages of the co-investment model, where investors enter into partnerships with private equity firms to finance larger transactions. However, these advantages depend on the volume and quality of deal flow. “The more qualitative deals you see, the more selective you can be – and the stronger your portfolio is likely to perform at the end,” he says.
Co-investment provides investors with diversification through exposure to a wide range of sectors and regions. Meanwhile, access to leading transactions enables investors to cherry-pick from the best opportunities. Co-investment funds can offer more attractive fees and carry than traditional private equity funds, as well as faster deployment as capital is put to work more quickly.
Fournier adds the current environment has put a premium on investors’ ability to react quickly and flexibly as the circumstances dictate. “You need to be able to move fast – to select investments very carefully and to be able to adapt when conditions evolve.”
[1] Source: comments from Lionel Gomez on this podcast https://viewpoint.bnpparibas-am.com/talking-heads-curious-about-private-equity/
[2] https://www.bain.com/insights/outlook-is-a-recovery-starting-to-take-shape-global-private-equity-report-2025/
