Tariffs, tensions and turbulence: Navigating fresh headwinds in private funds
Unease returns to fundraising conversations in private funds
Having just returned from ten days meeting clients and advisors in the US, it is clear the private funds industry is grappling with fresh headwinds just as recovery seemed within reach. The recent escalation of trade tensions following President Trump’s tariff announcements has significantly dented investor confidence, creating a ripple effect felt globally, with a noticeable chilling effect on capital commitments.
Contributors
Signs of LP caution are emerging globally among fund managers
Whilst most fund launches remain broadly on track, there’s growing caution among limited partners (LPs). Across the industry, signs of hesitation and strategic pauses are emerging – not just in the US, but globally.
LPs are scaling back commitments, deferring decisions, or halting investments entirely. Danish investors, for example, particularly unsettled by geopolitical tensions surrounding Greenland, have notably reduced or delayed commitments. Just last week, one Danish LP halved its planned investment and another deferred its commitment to a later close.
In North America, several US endowments are expressing concern over potential changes to their tax status, with growing anxiety around reduced grant funding. And while not yet widespread, we are also seeing signs of increased internal scrutiny from Canadian investors, who are beginning to revisit their allocations and commitments. One prominent Canadian investor has frozen all new commitments, including re-ups, whilst the other has imposed a ban on employee travel to the US for work purposes.
Liquidity and pricing pressures mount for private funds
The ripple effect isn’t limited to fundraising alone. At the asset level, urgently needed liquidity is now under pressure. Inflation fears, coupled with ongoing policy uncertainty, have complicated asset pricing, further contributing to market inertia.
With investment programmes for 2025 already largely in place, the industry’s best short-term hope is a return to manageable volatility – conditions under which risk can be priced rather than feared.
Staying focused amid fragile sentiment in 2025
The coming months will be pivotal. Whilst the fundamentals of private capital remain robust, sentiment is fragile. Successfully navigating this period will require resilience, transparency and unwavering focus on long-term value creation.
