Quarterly CIO perspectives - Private markets 

We expect a short-term slowdown in new deal activity as the market recalibrates to tariff impacts. Bilateral negotiations — particularly between the US and China — may be pivotal in determining the duration and depth of disruption.

In response, many private equity managers are tilting toward companies that have longer-term growth trajectories and lower global supply chain exposure — such as those in the technology and software, digital infrastructure, and healthcare services segments. We would also expect managers with expertise in logistics to find interesting opportunities as supply chains are reshaped.

Deal structures could become more conservative, with increased scrutiny on cost pass-through ability and margin resilience. Valuations in private markets may lag public market repricing but can offer a more stable assessment of company fundamentals.

Additionally, increased volatility could drive private business owners to seek long-duration capital partners. Therefore, we anticipate increased buyout activity and recapitalizations in tariff-affected verticals, creating strategic entry points for well-capitalized general partners (GPs).

Falling public equity valuations may trigger overallocation alerts in institutional portfolios, potentially leading to a pause or pullback in new commitments to private markets. Slower realizations and reduced liquidity could further compound this effect.

Secondary funds are well-positioned to address this capital mismatch by providing liquidity solutions to limited partners (LPs), and acquiring private market positions at attractive discounts to net asset value. In parallel, the slower fundraising cycle is creating favorable conditions for LPs to help negotiate better terms and potentially gain access to oversubscribed managers.

With a longer fundraising cycle for most managers, coupled with more conservative deal structures that require more equity capitalization, investors are also seeing increasing co-investment opportunities. Typically offering low to no fees or carried interest costs, and with a expanding opportunity set, co-investments can be additive to the return profile of investor portfolios.

Industrial and export/import-reliant sectors may experience earnings pressure and deferred capital investment. In contrast, domestic service-oriented sectors — such as financial services, education, and healthcare — should prove more durable.

Investors tend to prefer private credit strategies focused on asset-based lending with durable collateral, decreasing exposure to consumer and student loans, while increasing exposure to senior direct lending in quality and stable sectors.

Increased dispersion can create a compelling backdrop for managers with deep sourcing networks and industry specialization. Managers with thematic focus areas — such as data center infrastructure or reshoring trends — may find differentiated return streams in this environment.