European private equity entered 2025 with a striking split between portfolio resilience and industry-wide constraints. Speaking at the Largest DACH-focused Private Equity Conference in Munich, Oakley Capital, Triton, and Generali reported steady exits and strong returns in selected segments, but underlined that liquidity remains at multi-year lows and fundraising cycles are lengthening. 

Meanwhile, AI and defence spending are forcing managers to rethink investment strategies across the region.

The divergence between strong and weak assets is becoming more pronounced. Technology companies with robust growth and resilient business models continue to command high valuations, while weaker performers remain stuck in portfolios. For investors like Oakley Capital, this bifurcation is reshaping exit strategies and placing greater emphasis on careful selection and creative structuring.

Geographic exposure has also played a role in portfolio resilience. Triton has benefitted from its focus on the Nordic and German markets, where relative stability has underpinned performance and enabled timely exits. But as Managing Partner Andi Klein noted, much of the recent activity has centred on selling the best-performing companies, leaving the industry with the challenge of addressing underperformers that linger in portfolios.

Liquidity, however, is the most pressing challenge. Distributions across the industry remain below 10% of opening NAV, half the long-term historical average. Oakley has turned to continuation funds to extend holding periods, while Triton has been able to deliver strong DPI from lower mid-market energy deals. Yet the imbalance between capital returned and the stock of unrealised assets is evident, limiting LPs’ ability to recycle commitments.

For LPs such as Generali, consistency remains the priority, as pointed out by Bruno Sollazzo, Group Head of Private Equity Investments at Generali. He argued that staying invested through volatility is essential, pointing to the long-term returns that have historically followed periods of dislocation. “Institutional investors should remain consistent in investing in private equity,” he maintained. Generali’s exposure, 50% US, 30% Europe, 20% Asia, has been tested by rising rates and geopolitical shocks, but Sollazzo stressed that retrenchment is not an option.

Fundraising in particular reflects these tensions. In the US, LPs face liquidity constraints after years of high allocations. In Europe, the issue is decision-making complexity, particularly among institutional investors. Managers who can demonstrate realised returns are still able to attract capital. A notable example is Oakley’s recent fundraise which closed quickly on the back of strong DPI. Nonetheless, differentiation between firms is sharpening.

AI is another defining theme. Oakley has integrated AI tools into due diligence and portfolio analysis, using them to challenge investment committee assumptions. Triton is deploying AI at the portfolio level to increase efficiency in sourcing and operations. Yet enthusiasm is tempered by experience: Klein pointed to historical technology bubbles as a cautionary reminder that adoption curves do not always translate into durable returns. Sollazzo highlighted another risk: the heavy concentration of venture capital into AI and machine learning in North America, raising questions about sustainability as well as opportunity.

Defence and energy transition are also rising on the agenda. Increased government spending is driving opportunities across supply chains, from infrastructure to cybersecurity. Valuations are already high, and managers remain wary of paying peak prices. Oakley flagged software and cyber as more attractive subsectors, while Triton is exploring how shifts in infrastructure spending could create long-term opportunities at the intersection of defence and energy transition.

Taken together, the discussion points to an industry under pressure but far from retreating. Portfolios remain broadly resilient, exits are still possible for high-quality assets, and LP appetite for private equity allocations has not diminished. But with liquidity tight, fundraising cycles longer, and new sectors reshaping investment priorities, success in 2025 will depend on discipline, selectivity, and the ability to navigate a market defined by bifurcation.

by Andreea Melinti

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