European private market firms are navigating a difficult landscape, marked by a sharp slowdown in fundraising and dealmaking in 2025, highlights Morningstar in its latest report.
With traditional exits like IPOs and sales becoming increasingly scarce, firms are facing a liquidity squeeze that is reshaping investor strategies.
This is the conclusion of Morningstar’s European Asset Managers: 2025 Q4 research, offering a timely look at how private market managers are adapting to sustained pressure and what it means for the future of private equity investing.
What stands out is that after a record-breaking 2024, European private equity fundraising has started 2025 on a weaker note.
Limited exits and subdued investor sentiment are key factors contributing to this slowdown.
In addition, a challenging environment for exits is delaying capital returns to investors, impacting future fundraising cycles.
Private market firms are encountering significant hurdles in exiting investments, making semiliquid funds an increasingly vital tool.
These vehicles offer limited partners partial liquidity without waiting for the full life cycle of a closed-end fund, providing much-needed flexibility in a constrained market.
Possibly worst of all, is that recent underperformance in private market funds has narrowed the valuation gap with traditional asset managers.
However, private market firms continue to command a premium, reflecting their superior growth potential despite current challenges.
There has also been an impact related to tariff-related fears and market sentiment with private market firms disproportionately affected by tariff-related concerns, further dampening investor enthusiasm.
“Private market firms are caught between a rock and a hard place,” said Johann Scholtz, senior equity analyst at Morningstar. And he added that the “balancing act between managing exits and maintaining investor confidence is the core challenge for the industry right now.”
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