Juniper Square Private Markets March Madness

Swish.

Is that the sound of Duke University nailing a 3-pointer or a niche fund snagging huge returns?

Maybe it’s both.

March Madness is upon us, that annual ritual where college basketball teams hit the court to prove their merit in some of the most thrilling matchups in all of sports.

At Juniper Square, closing on record capital is never a game. But that doesn’t mean we can’t have some fun. Debating megafunds vs. exits might not be on par with whether Auburn can beat Purdue. That said, here’s our predictions for the biggest matchups—er, trends—we’re watching this year, broken down by our own version of “regions.” Which trend will win the year? We’ll let you decide on LinkedIn and read out the results.

Region I: Private Equity

• Megafunds vs. Niche-focused funds
• Soaring exits and deals vs. The tundra

Region II: Venture Capital

• DeepSeek upends fundraising vs. AI prints money

• Liquid dreams vs. Hard reality

Region III: Commercial Real Estate

• A stronger core vs. More distress

• Bulls on parade vs. A yearlong hibernation

Region IV: Macro Environment

• Interest rates & tariffs: Will they vs. won’t they

• Rocket ships take flight vs. Private for longer

Megafunds vs. niche-focused funds

Megafunds have been on a roll. With growing appetite from retail investors, some PE watchers expect to see megafunds keep winning in 2025. The biggest funds offer risk mitigation thanks to their variety of geographies and asset classes, supported by their grab-bag “special opportunities" operations, which can exploit promising deals that don’t fit elsewhere.

Yet that interest may be drying up. The pause in dealmaking over the past few years has kept dry powder above the $1 trillion mark since 2022. That means LPs are paying fees on a lot of money that isn’t doing anything. If distributions pick up speed, this leakage won’t hurt so much, but without such activity, the steady drip of capital calls to cover fees may start to feel more like a back court pounding than a winning strategy.

But since few megafunds are scheduled to close in 2025, niche-focused mid-market and growth equity funds may pick up the slack. Growth equity funds have taken a pounding as LPs soured on the “growth at all costs” strategy of the late 2010s and early 2020s, but their low-leverage deals have performed well. Similarly mid-market funds, which also tend to use less leverage, offer a more focused approach, applying domain expertise to create value in targeted verticals or assets. This might be a chance for back-bench talent to shine.

Soaring exits and deals vs. the tundra

Here are the competing trends we predict for exits in 2025. As you’ll see, it’s a wide-open field of possibilities out there, with reasons to believe we’re on the verge of a boom or bust year. It’s a true toss-up.

Exit values and counts might soar if 2024’s trend of increased exit counts and values continues. The reason: GPs yield to LP pressure for distributions and funds reach the ends of their lives. Values rise because the GPs rolled up their sleeves and did the hard work of adding value while there was no multiple to ride or financial arbitrage to enjoy. With tariff barriers and restrictions on immigration, companies might prefer to buy necessary complements to their businesses rather than build them.

Alternatively, exit counts could soar and values could soften. After a brief period of selling their best companies, PE firms might move to cleaning out their portfolios and getting rid of under-performing companies, while retaining those that can make quantum leaps in value creation with a bit more gestation time.

Or, exit counts deflate while values soar. Eager to boost performance numbers as they prepare to raise funds in 2026, firms may well decide to sell their best companies this year. In this scenario, acquirers would likely be willing to pay up because there are only a limited number of top-quality operations.

Meanwhile, dealmaking may soar. Typically, the biggest PE deals are take-privates when publicly traded companies decide to free themselves from the tyranny of quarterly reporting and join the portfolios of PE firms to undergo a process of value creation. Stock market uncertainty or collapse can inspire even smaller companies to go private too. PE firms may want to put their stocks of dry powder to use in secondary deals or continue their trend of acquiring smaller companies to add value to their portfolio companies by acquiring external operations.

But dealmaking could freeze. If the public markets become uncertain and interest rates fluctuate dramatically, PE firms may choose to sit on the bench until the macro environment stabilizes. This period could be put to good use as the GPs implement value-added strategies for their portfolio companies.

For parallel reasons, exits could also freeze. Tariffs could slow exits in the relevant sectors and further extend hold times. Tariffs may also boost inflation, which would reduce the possibility of interest rate cuts and raise worries about trade implications for transactions involving cross-border acquisitions or international supply lines.

Some trends, like some teams, feel like clear runaway winners. The top of the bracket is easy to predict. But not all NCAA tournament brackets break so obviously. VC funding and exits feel unpredictable again this year; here are a few 2025 scenarios and how they could play out.

DeepSeek upends fundraising vs. AI (figuratively) prints money

Has DeepSeek ruined the AI fundraising party? The company has rattled the assumption that AI inherently requires endless streams of capital to be transformative. VC firms going all-in on AI may now find it more difficult to convince LPs that capital-intensive AI companies are worth bankrolling.

…or fundraising might climb. Cheaper AI arguably offers huge growth opportunities. Retail investors, eager to back exciting innovations, could pile into assets they had previously been unable to access. VC firms may develop new outreach programs to market access to their star investors, further exciting interest in the sector.

Then again, fundraising might stay unchanged. The established fund managers could keep raising money while new ones focused on AI innovation struggle. If exits stay in the doldrums, distributions will remain sluggish and LPs will be both over-allocated to VC and short on capital to commit to new funds (regardless of whether the managers are new or established), even if they wish to do so.

Liquid dreams vs. hard reality

Once again, exits and deals may take the trophy They may also collapse.

Exit activity could blow away the competition. GPs could rush to show their portfolio companies the door to evade potential hikes in carried interest (gains sharing) tax rates that might occur in 2026. PE firms could also acquire VC-backed companies to increase value in their own portfolio companies. If this trend proves true, LPs will rejoice in liquidity like a winning cross-court 3-pointer.

Meanwhile, dealmaking could remain stable or improve, as cuts to federal government expenditures could theoretically offer room for startups to rise up and provide services—albeit at a price—formerly supplied by the government. Widespread disruption to, and innovation in, healthcare, education, energy, security, and transportation might well create exciting deal opportunities for VC.

…or exit activity might contract: Exits might well collapse in the face of market and global uncertainty, especially with tariff barriers complicating deals that involve any type of cross-border interaction. The mismatch of buyer and seller urgency and valuation would persist. The golden handcuffs of inflated valuation would constrict options like a grumpy star player insisting on entering the transfer portal.

And dealmaking might collapse. AI deals might continue, but with exits constrained, a lack of H-1B visas discouraging talented international engineers and founders, cuts to federal grant programs, and widespread economic uncertainty, VC firms might decide to cut back on activity.

What if all VC activity catches fire? Without government regulation, and with investors seeking good returns as well as renewed trust in the private sector to deliver services from education and healthcare to transportation and food safety, new sectors could spring up as promising investment opportunities. Larger companies would be eager to acquire these services themselves, fueling a surge of exits.

A stronger core vs. too much distress

Fundraising could recover in 2025. Retail investors could hit CRE with a full court press as fund managers offer accessibility to tailored vehicles. At the same time, institutional investors and endowments crowd the basket as they see markets stabilize and distributions pick up. Across the boards in this scenario, CRE segments would see gains as Core improves from its strong showing from 2024, and enthusiasm spreads to core plus, debt, and distressed assets.

…or fundraising sinks. Widespread market uncertainty, rising interest rates, scarcer debt, and falling GDP might freeze investors, renters, purchasers, and fund managers. With a $2 trillion “wall” of debt maturing by 2026 and property values across the board only beginning to stabilize, LPs may be scared off and stiff-arm any fundraising outreach (wait, are we mixing sports?).

Bulls on parade vs. a yearlong hibernation

Deals are a jumpball. Who wins?

Deals trend upward: After a shaky few years, dealmaking strengthens based on a widespread recovery, reduced regulatory burdens, and lower interest rates. Office, residential, and light industrial all pick up steam with return to office (RTO), housing demand growth from tax rate cuts, and reshoring activity. Sharpshooters continue to hunt aggressively for opportunities in dislocated markets. Signs are pointing up - prepare the parade!

Deals trend down: Interest rates rise, tariffs are threatened but aren’t imposed, severe storms and fires damage/destroy buildings forcing owners to repair their assets. Office collapses further due to federal workforce cuts, federal funding cuts hurt residential, and industrial falls as the economy contracts. With tepid buying interest in assets outside of multifamily industrial/logistics already expressed, investors may find it more palatable to spend this year on the bench.

The broader context of our game is the macroeconomic environment. While there are a host of macro trends, these may be the most likely contenders in our March Madness. Which trend will dominate 2025?

Interest rates & tariffs: will they vs. won’t they

Interest rates and tariffs. Both are unknown quantities with huge potential impacts. Will we see cuts and levies, respectively? And what does it mean for the private markets?

Possibilities for interest rate cuts in 2025 run the gamut:

• 4 interest rate cuts: To spur economic growth in the wake of proposed changes, the Fed cuts rates four times. Private markets rise as investors seek returns.

• 2 interest rate cuts: The proposed changes of the early Trump administration are not widely implemented and the economy’s performance (and that of private markets) echoes 2024. The Fed meets the current expectation of two rate cuts in 2025.

• 1 interest rate increase: Inflation rises due to price increases from tariffs on imports and rising labor costs for domestically produced items, particularly food. The Fed could raise interest rates in response. Private markets underperform due to higher rates.

Tariffs, if imposed, have the power to topple the whole game. Which country and which goods will be next? Will they hold at expected levels? With so much current uncertainty in the political landscape around imports and exports, this is one of the trickier trends to predict. The impact on private markets varies depending on the sector of interest. Here are a few possible outcomes:

• Increased domestic production. If all imports were to see a 25% tariff, companies might opt to reshore their production, dramatically increasing domestic manufacturing and creating well-paying jobs. Industrial and light industrial properties would thrive, as would companies manufacturing substitutes for imports that have become more expensive.
  

• Reduced domestic production. All imports could see a 25% tariff – but international retaliation hits hard. In this scenario trading partners embargo critical inputs that the U.S. cannot otherwise access such as rare minerals or specific manufactured parts. Across the country, factories shutter and jobs vanish. The recession echoes the effects of the Global Financial Crisis.
  

• Minimal immediate effect. The most drastic tariff threats might well dissipate like the Syracuse University defense (sorry, Orange). Relations with trading partners continue to be strained in the aftermath of the first exchange, but the economic impact could feel slight, if any at all. The economy performs as it did in 2024, but with the anxiety of a tied game in the final seconds.

Rocket ships take flight vs. private for longer

The US IPO market has been sluggish post-COVID as investors increasingly value profit over “growth at all costs”. Will this be the year rocket ship startups take flight in the public markets?

Possibility #1: The IPO market surges. Innovation, AI, and economic growth in general thrive in the new low-regulation/low-taxation context and drive the stock market to new highs in 2025. The IPO window opens as more established private companies balance attractive growth with operational rigor.

Possibility #2: The IPO market slogs. With lower immigration, cuts to federal programs, tariffs, higher insurance burdens due to climate-related catastrophes, and greater economic inequality, corporate performance struggles in the face of lower revenue and profits. Private companies don’t go public and public companies don’t have the confidence or balance sheets to make acquisitions. Unicorns, those mascots of the 2020 pandemic growth explosion, have stalled out – more than 33% of them haven’t raised capital since 2021. Many are stuck in limbo and will have to abandon their billion-dollar valuations or, as CB Insights wrote, risk giving up their pompoms and becoming unicorpses.

No one can predict the future of the private markets or how March Madness will shake out, but how you prepare to play the game and win is in your control. Drive to the basket–or, click here to find out how Juniper Square can help your team succeed, not just during March Madness but all year round.