It's harder out there.
Each year, Barnes & Thornburg surveys limited partners and general partners across the investment funds landscape to map the hedge fund, investment bank, private credit, venture capital, and private equity trends that matter — and the market’s response.
While our 2023 and 2024 reports were preoccupied with how to survive, 2025 was meant to be the year to thrive. Limited Partners (LPs) and General Partners (GPs) entered the year with optimism, expecting to access investment opportunities following a few difficult years. But that anticipated dealmaking renaissance hit snags as the Trump administration’s tariff announcements heightened volatility. Many portfolio companies — still facing high interest rates and inflationary pressures — saw revenues begin to slump. As a result, the need (and struggle) to provide LPs with liquidity has substantially increased.
Barnes & Thornburg’s 2025 Investment Funds Outlook Report makes a case for bringing some of that optimism back.
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6 Economic Trends Affecting Private Investment Funds
Despite a turbulent start to 2025, the majority of respondents view the general economic outlook (72%), availability of capital (66%), and regulatory environment (64%) as investment opportunities. But challenges are mounting, too, with LPs noticeably more concerned about financing terms, transparency, and ESG — and GPs more concerned about fundraising, returns, and regulatory risk — than in 2024.
Co-chair of Barnes & Thornburg’s
Private Funds and Asset Management Group
Scott Beal
A year and a half away from the FTX collapse, we’ve seen significant recoveries in bitcoin and other cryptocurrencies. The SEC’s approval of bitcoin ETFs is a big deal for the industry and may also increase the willingness of allocators to make investments in private crypto funds and other nonregulated products.
Barnes & Thornburg’s 2024 Investment Funds Outlook Report
On an earnings call late last year, Blackstone president Jonathan Gray offered a succinct summary of the institutional fundraising climate:
Get the full Barnes & Thornburg Investment Funds Outlook Report
Private Capital Trends To Watch in 2025 — and How Limited Partners
and General Partners Are Responding
There are numerous instances where incorporating AI could benefit fund managers, from market analysis to automating research processes to simply freeing up managers’ time. It follows that such technologies will have a positive overall impact on fund performance.
1. Political and economic volatility
2. Increased use of fund structuring
3. Cybersecurity and AI compliance
4. Failure to future-proof
5. Hedge fund, private credit, and crypto growth
6. Increased private investment in tech, energy, and financial services
1. Political and economic volatility creates challenges and opportunities for private capital.
72% View the Economic Outlook as an Investment Opportunity
The third-annual edition of this research offers insight into the challenges and opportunities U.S. investment professionals expect to face, and how they’re responding to the current uncertainty afflicting every industry.
It also showcases important findings about hedge funds, private credit, and cryptocurrency sectors.
Private Capital Trends To Watch in 2025 — and How Limited Partners and General Partners Are Responding
Though respondents are relatively split on whether the Trump administration is making compliance with fund regulation and policy more or less challenging, LPs and GPs agree that cybersecurity and data management and AI are top compliance priorities in 2025. From there, however, LP and GP views diverge, with LPs more focused on liquidity management, ESG, transparency, and national security and GPs more concerned about fund valuation and tax issues.
3. Cybersecurity and AI are the top compliance priorities for investment funds.
More Than 7 in 10 Expect Increased Use of Investment Period Extensions
More than half of respondents anticipate heightened use of the various fund terms we asked about, such as investment period extensions (72% expect an increase in 2025), LP-led use of securitization techniques (72%), changes in distribution of fund proceeds (69%), and term extensions (69%).
2. Investors and fund managers are using fund structuring tools to manage uncertainty.
Private equity firms in particular are anticipating a smoother compliance environment under the Trump administration — 64% say it will be easier to manage — which makes sense given that the sector has been in the Securities and Exchange Commission’s crosshairs for the past few years.”
Scott Beal, Co-Chair of Barnes & Thornburg’s Private Funds and Asset Management Practice
96% of LPs Say a Succession Plan Is Important but Fewer Than Half of GPs Have One in Place
Amid such intense uncertainty, LPs are homing in on future-proofing strategies like succession planning, governance, and transparency. Yet GPs have some room for improvement here: 96% of LPs say a succession plan is important, but fewer than half of GPs currently have one in place. Meanwhile, the share of LPs citing transparency as a compliance focus is double that of GPs.
4. LPs are looking ahead and future-proofing, but GPs lag behind.
Respondents believe these three areas of the private investment market can thrive in volatility. When asked about the industry’s performance over the next 12 months, 75% of hedge fund professionals are optimistic. Nearly 80% of all respondents anticipate a stronger private credit market in 2025 than in 2024, and 84% are optimistic about cryptocurrency investments.
5. Hedge funds, private credit, and cryptocurrency markets are expected to grow.
Get a Closer Look at What’s Ahead for Hedge Funds, Private Credit & Cryptocurrency
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Despite ongoing economic uncertainty, private investment into various industries is expected to increase in the year to come, led by financial services, technology, and energy. In particular, automotive and manufacturing companies will see the greatest YOY influx, while investment is anticipated to slow the most in healthcare and professional services.
6. Private investment in financial services, tech, and energy is projected to increase.
• $1.7 trillion is estimated to be held by GPs in private equity and
7 Numbers Driving the Limited Partners vs. General Partners Dynamic
venture capital funds.
• 5 years: The holding period for nearly ⅓ of U.S. buyout-backed
companies at the end of 2024, a near-decade high.
• 60% of the 3,800 U.S. PE-owned companies that have been
held for more than five years are exposed to tariff volatility, threatening sales.
• 63% of LPs expressed significant concern about ESG
compliance, a 320% increase year-over-year.
• 67% of LPs are concerned about financing terms, nearly
3x the number in 2023.
Evaluating one-off co-investment opportunities adds a significant amount of work to LPs’ plates, which is why an anticipated jump in such investments can be such a pain point for these investors.”
Maria Monte, Partner in Barnes & Thornburg’s Private Funds and Asset Management Practice
• 49% of GPs were concerned about fund valuation as a
compliance factor, an 81% uptick year-over-year.
• 51% of GPs are concerned about fundraising, more than
double the number in 2023.
Meet the Barnes & Thornburg Private Funds Team
Jahan Sharifi, Partner, Corporate Department Chair, Fintech Co-Chair, Private Funds and Asset Management Co-Chair
Jahan Sharifi represents private investment funds and other financial investors in structuring private capital investments and private acquisitions in many industries in the U.S. and internationally.
Jahan advises on a broad scope of private capital transactions, including preferred equity and hybrid capital, venture capital and growth equity, joint ventures, mergers and acquisitions, private credit, convertible instruments, recapitalizations, post-reorganization equity, private investments in public equity, and other specialized investment structures.
Connect with Jahan
Scott L. Beal, Partner, Private Funds and Asset Management Co-Chair
With 15 years of private practice and in-house experience, Scott Beal is a partner in the firm’s corporate department who concentrates on investment management.
Scott is the co-chair of Barnes & Thornburg’s Private Funds and Asset Management practice and was one of the founding partners of the firm’s New York office. He focuses his practice on the formation and operation of hedge funds and other private investment funds, including private equity funds, venture capital funds, credit funds, cryptocurrency funds and fund of funds. Scott advises clients with respect to traditional fund structures as well as bespoke hybrid vehicles. He frequently advises on seed investments and spinouts of hedge fund managers, as well as acquisitions and dispositions of investment advisory businesses. Scott also represents a number of prominent family offices, endowments and foundations that invest in private funds.
Connect with Scott
Maria K. Monte, Partner
Maria Monte’s practice is focused on the formation, structuring and operation of private investment funds, as well as providing advice to institutional and other investors regarding potential investments in private funds.
Maria advises private investment fund clients, including private equity funds, hedge funds, credit funds and venture funds, in virtually every step of strategic fundraising, ongoing operation and regulatory compliance. She also represents investors and potential investors in analyzing, evaluating and negotiating such investment opportunities.
Connect with Maria
Our Methodology for Surveying LPs, GPs & Service Providers
The report draws on March and April survey responses from LPs, GPs, and other professionals at leading hedge fund, private equity, private credit, venture capital, and investment banking organizations. Respondents represented hedge fund, private equity, private credit, investment banks, and venture capital organizations investing in more than a dozen industries.
Evaluating one-off co-investment opportunities adds a significant amount of work to LPs’ plates, which is why an anticipated jump in such investments can be such a pain point for these investors.”
Maria Monte, Partner in Barnes & Thornburg’s Private Funds and Asset Management Practice