PE hit a wall after a strong start this year with USD 1.2 tn in dry powder waiting to be deployed

The first half of the year has been a reality check for private equity, as tariffs, geopolitical volatility, and tighter liquidity reshape the playbook. The industry kicked off 2025 with momentum, but by April, trade tensions and policy shocks flipped the mood. PE dealmakers are still doing business — but they’re having to work a lot harder for it.

A strong start…until it wasn’t: The year began on a high note. Credit was flowing, inflation looked tamer, and interest rates were heading down. Deal-value hit its highest level since 2Q 2022.

But things changed fast: By early April, a fresh round of US tariffs sent markets wobbling. Transaction value in April fell 24% below the 1Q average, and dealcount dropped 22%, according to Bain and Company’s Private Equity Midyear Report 2025. IPOs all but froze with Swedish fintech Klarna in early April reportedly pausing its plans for a US IPO.

Liquidity is drying up, which is bad news for LPs — who want liquidity back — and GPs — who are trying to raise new money. Buyout funds are on track to avoid a sixth straight quarterly drop. Not a single buyout fund that closed in 1Q cracked USD 5 bn — a first in a decade. More than 18k funds are chasing USD 3.3 tn in capital. That’s USD 3 of demand for every USD 1 available. “Although the decline might have bottomed out, hope for a recovery in the inflows of fresh capital has likely been pushed out into 2026 (or beyond),” the report reads.

LPs are after real exits, even at markdowns. In a March poll, 60% said they’d prefer a traditional sale over alternatives even if it means taking a valuation hit.

Some 33% of LPs said they were slowing their private market investments in response to US tariffs, while 8% were pausing entirely, the report said, citing a survey by Campbell Lutyens in April. Some 28% of them are also looking to up their allocations to private credit, while 20% want to add more infrastructure positions to their portfolios, according to the same survey.

Secondary sales are one workaround: Chinese sovereign wealth fund China Investment Corporation is reportedly looking to offload USD 1 bn of US-managed PE assets. NYC pension systems just closed a USD 5 bn sale led by Blackstone. Meanwhile, secondaries still make up less than 5% of global PE AUM.

What’s next: There’s still USD 1.2 tn in dry powder waiting to be deployed — and GPs are under pressure to put it to work. With exits harder to come by, firms are doubling down on cost control, growth initiatives, and AI-led productivity to create value and prove their portfolios have legs.

MARKETS THIS MORNING-

In a reversal of fortunes, Asia-Pacific markets are in the green in early morning trading, following a positive close on Wall Street last night. Japan’s Nikkei, South Korea’s Kospi, the Hang Seng Index, and the S&P/ASX 200 are all trading up as markets begin to push through the chaos caused by the Trump administration’s tariff policies. Across the pond, futures indicate Wall Street will open in the red later today.

THE CLOSING BELL: TADAWUL-

The TASI was up 0.2% yesterday on turnover of SAR 4 bn. The index is down 9.9% YTD.

In the green: Savola Group (+4.5%), UCIC (+4.4%) and Aldawaa (+2.9%).

In the red: RIBL (−3.5%), Naseej (−2.9%) and Zamil Industrial (−2.8%).

THE CLOSING BELL: NOMU-

The NomuC was up 1.2% yesterday on turnover of SAR 28.5 mn. The index is down 14.3% YTD.

In the green: Ladun (+15.0%), Balady (+9.1%) and Nofoth (+6.1%).

In the red: Alkuzama (−15.0%), Apico (−14.6%) and Future Vision (−11.1%).

CORPORATE ACTIONS-

Ma’aden receives CMA greenlight to fully own two JVs: Saudi Arabian Mining Company (Maaden) received approval to increase its capital to SAR 38.9 bn, issuing 85.9 mn ordinary shares to acquire Alcoa’s stake in Ma’aden Aluminium and AWA Saudi’s stake in Ma’aden Bauxite and Alumina, according to a statement by the Capital Market Authority.

REFRESHER- Maaden agreed to buy a 25.1% stake in its JV with Alcoa for USD 1.1 bn in lastSeptember. The agreement gave Ma’aden full control of both Ma’aden Aluminium Company and MBAC.

Nofoth Food Products Company’s shareholders approved a SAR 11.9 mn dividend distribution for FY 2024 at SAR 0.25 per share in an extraordinary general meeting, according to a disclosure to Tadawul. The distribution date is set for 15 June.