Optimism Persists Among U.S. Investment Professionals Despite Fundraising Headwinds — Evening Brief – 07.25.25
U.S. investment professionals remain broadly optimistic about future market growth and returns despite navigating a more challenging fundraising environment and extended investment holding periods, according to Barnes & Thornburg’s third annual Investment Funds Outlook Report.
The report suggests a maturing private markets landscape that is no longer solely reliant on buoyant markets or aggressive capital inflows. Instead, GPs and LPs are signaling an era of deliberate capital deployment, creative structuring, and strategic rebalancing.
High optimism around hedge funds and private credit—two strategies that benefit from volatility and flexible mandates—suggests investors are embracing complexity as a path to returns. Meanwhile, the growing spotlight on governance and succession points to the institutional evolution of the GP-LP relationship.
While the traditional private capital playbook is under pressure, the findings reveal an industry that is adapting quickly, leaning into innovation, and preparing for a new cycle of growth—even if the path forward looks very different from the one behind.
The spring 2025 survey of 121 general partners (GPs) and limited partners (LPs) found that 72% of respondents maintain a positive economic outlook, even as market volatility and tighter LP scrutiny have tempered some early-year optimism.
“While many GPs came into this year very optimistic about expected fundraising, for many managers that optimism has been tempered so far, in part due to market volatility and economic uncertainty,” said Scott Beal, partner and co-chair of the firm’s Private Funds and Asset Management Practice.
The report highlights how private markets are adapting to slower exits and tighter liquidity by extending fund terms and reshaping fund structures. Seventy-two percent of respondents expect more frequent investment period extensions—up from 56% a year ago—while 76% anticipate changes in GP commitments.
At the same time, LPs are deploying new liquidity strategies, including securitization techniques (72%) and revisions to fund distribution structures (69%), signaling a broader evolution of the traditional GP-LP relationship. While 47% of professionals identified exits as a key challenge, 43% saw opportunities, reflecting a bifurcated market where value creation remains possible for the best-positioned assets, even amid sluggish IPO and M&A activity.
Governance, transparency, and succession planning are also taking center stage in LP expectations. Nearly all LP respondents (96%) said succession planning is a critical concern, especially at founder-led firms, while investor use of investment restrictions and secondary liquidity options continues to rise.
“The marked increase in the level of investment restrictions and access to secondaries speak to efforts by investors to establish additional guardrails in today’s market,” said Maria Monte, partner in Barnes & Thornburg’s Private Funds and Asset Management Practice.
Despite structural shifts, investor sentiment is strongest around hedge funds, private credit, and cryptocurrency. Roughly 75% are optimistic about hedge fund performance over the next year, 80% anticipate continued strength in private credit markets as banks pull back from lending, and 84% believe cryptocurrency investments will gain momentum.