Private-equity managers pitching first-funds still face a tough sell in 2025, but plenty of firms will be taking the plunge anyway including ones that have operated as independent sponsors.
Last year in the U.S., firms closed 46 first-time private equity, growth and turnaround funds, raising $9.2 billion.

The private equity landscape is constantly evolving, with new firms and strategies emerging to capitalize on market opportunities. In 2025, first-time private equity funds face a unique set of challenges and opportunities. While the road to securing capital can be arduous, many firms are undeterred, driven by the potential for significant returns and the desire to shape the future of the industry.

The Landscape of First-Time Private Equity Funds

First-time private equity funds, often referred to as “first-time funds,” are investment vehicles managed by firms that have not previously raised capital from external investors. These funds typically focus on specific sectors or investment strategies, seeking to generate attractive returns for their limited partners (LPs).

In recent years, the number of first-time funds has surged, reflecting the growing interest in private equity as an asset class. According to Preqin, a data provider for alternative assets, the number of first-time funds raised globally increased by 20% between 2019 and 2020. This trend is expected to continue in 2025, driven by several factors, including:

• Strong performance of private equity: The private equity industry has consistently delivered attractive returns, outperforming many traditional asset classes. This track record has attracted a growing pool of LPs seeking to diversify their portfolios.
• Increasing access to capital: The emergence of specialized platforms and networks has made it easier for first-time fund managers to connect with potential LPs.
• Favorable regulatory environment: In some jurisdictions, regulatory changes have made it easier for first-time fund managers to raise capital.

First-time private equity funds face a challenging but rewarding landscape in 2025. By developing a strong investment thesis, building a talented team, and leveraging their networks, first-time fund managers can navigate the challenges and capitalize on the opportunities. The rise of independent sponsors as first-time fund managers is a testament to the evolving nature of the private equity industry and the increasing diversity of players. As the industry continues to evolve, first-time funds will play an increasingly important role in shaping the future of private equity.

Several key trends are shaping the hedge fund landscape in 2025:

• Increased allocations: Investors are increasingly allocating capital to hedge funds, seeking their ability to navigate market uncertainties and generate uncorrelated returns.  
• Demand for alpha: Investors are prioritizing managers with a proven track record of generating alpha, even if it means paying higher fees.
• Rise of multi-strategy funds: Multi-strategy funds, which employ a variety of investment strategies, are gaining popularity as investors seek diversified exposure within a single fund.  
• Focus on risk management: In a volatile market environment, risk management is paramount. Investors are seeking managers with robust risk management processes and a focus on downside protection.  
• Emphasis on ESG: Environmental, social, and governance (ESG) factors are increasingly important to investors. Hedge fund managers are incorporating ESG considerations into their investment processes to attract capital and meet investor expectations.  
• Technological advancements: Technology is transforming the hedge fund industry, with managers leveraging data analytics, artificial intelligence, and machine learning to enhance investment decision-making and operational efficiency.  

Private Equity: Adapting to a New Era

Private equity in 2025 is expected to remain a popular asset class, driven by its potential for generating attractive long-term returns. However, the industry is facing new challenges, including increased competition, higher valuations, and greater regulatory scrutiny.

Key trends shaping the private equity landscape in 2025 include:

• Continued growth: Despite challenges, the private equity industry is expected to continue its growth trajectory, driven by investor demand for alternative assets and the availability of capital.  
• Increased competition: The private equity market is becoming increasingly competitive, with more firms vying for deals and capital.  
• Higher valuations: Valuations for private companies remain elevated, making it more challenging for private equity firms to find attractive investment opportunities.
• Greater regulatory scrutiny: Regulators are increasing their scrutiny of the private equity industry, focusing on issues such as fees, transparency, and risk management.  
• Focus on operational value creation: Private equity firms are increasingly focusing on operational value creation, working with portfolio companies to improve their performance and drive growth.  
• Technological disruption: Technology is disrupting the private equity industry, with firms leveraging data analytics, artificial intelligence, and other technologies to enhance deal sourcing, due diligence, and portfolio management.  

Conclusion

Both hedge funds and private equity are navigating a dynamic landscape in 2025. While both industries are poised for growth, success will require adaptability, innovation, and a focus on delivering value to investors. Managers who can effectively navigate the challenges and capitalize on the opportunities will be well-positioned for success in the years to come.