USA Private Equity Market Outlook to 2028

USA Private Equity Market Overview

• The USA private equity market has shown growth over the past five years, driven by increased investor demand and a favorable economic environment. The market is valued at USD 400 billion, reflecting strong capital inflows from institutional investors, particularly pension funds and sovereign wealth funds, who are seeking higher returns in a low-interest-rate environment. This growth is supported by robust deal activity, especially in sectors such as technology, healthcare, and real estate.

• Key cities like New York, Boston, and San Francisco dominate the market due to their established financial ecosystems, access to high-net-worth individuals, and proximity to leading venture capital firms and institutional investors. These cities are home to major private equity firms, offering a well-developed infrastructure for deal sourcing, fundraising, and exit strategies. Their dominance is also reinforced by strong legal and regulatory frameworks supporting private equity transactions.
• In 2024, the SEC introduced enhanced reporting requirements for private equity funds, mandating more transparency in fund performance and fee structures. This has increased compliance costs for firms, with regulatory filings rising by 20% year-over-year. The new rules aim to protect investors by providing more detailed information about fund risks and operations. According to the SEC, these reforms are expected to impact over 3,500 private equity funds operating in the U.S.

USA Private Equity Market Segmentation

By Asset Class: The market is segmented by asset class into venture capital, buyouts, growth capital, distressed/turnaround, and secondary funds. Currently, buyouts hold the dominant market share due to the ability of firms to restructure underperforming companies and realize significant returns upon exit. Buyout funds benefit from a well-established pipeline of acquisition targets across industries, coupled with easy access to leveraged financing, which enhances their capacity to generate value through operational improvements and strategic add-ons.

By Industry: The market is also segmented by industry into healthcare, technology, consumer goods, energy, and financial services. Healthcare holds a dominant market share due to increasing demand for innovative treatments, biotech advancements, and the resilience of the sector during economic downturns. Private equity investors are particularly drawn to healthcare because of the high potential for growth and consistent demand, driven by demographic shifts such as aging populations and the rising prevalence of chronic diseases.

USA Private Equity Market Competitive Landscape

The USA private equity market is dominated by several major players that have cemented their positions through extensive capital-raising capabilities, global reach, and strong portfolios of portfolio companies. The competition is high, but consolidation in the market is seen, with larger firms absorbing smaller players to expand their geographic footprint and sector focus. The market features both local and international firms, with the largest players maintaining robust operations across multiple asset classes and industries.

USA Private Equity Industry Analysis

Growth Drivers

• Increasing Institutional Investor Allocations: Institutional investors, including pension funds, endowments, and insurance companies, have significantly increased their allocations to private equity. In 2024, U.S. public pension funds allocated around 12% of their total portfolios to private equity investments, as per data from the National Association of State Retirement Administrators (NASRA). This shift is driven by the desire for higher returns compared to traditional fixed-income assets. The total capital raised by private equity funds from institutional investors reached over $150 billion in 2023, reflecting their confidence in the market.
• Capital Inflows from Sovereign Wealth Funds: Sovereign wealth funds (SWFs) have become key players in U.S. private equity markets. In 2024, capital inflows from SWFs into U.S. private equity reached over $60 billion, according to the U.S. Department of Commerce. Major SWFs, particularly from the Middle East and Asia, have increasingly diversified their portfolios by investing in U.S. private equity, attracted by the strong returns generated over the past decade. This capital has supported private equity firms in acquiring U.S.-based assets in sectors like technology and healthcare.
• Private Equity Fund Innovation: In 2023 and 2024, the U.S. market witnessed innovation in private equity fund structures, with a growing focus on Special Purpose Acquisition Companies (SPACs) and co-investment opportunities. SPACs raised over $25 billion in 2023, continuing to serve as a vehicle for private equity firms to access capital quickly without the complexities of traditional IPOs. Co-investments, where investors participate alongside private equity firms, have also gained popularity due to their lower fees, and this strategy saw over $20 billion in transactions during 2023.

Market Challenges

• Valuation Concerns: Private equity valuations have reached unprecedented highs, with the average deal multiple exceeding 10x EBITDA in 2023. This rise is fueled by competition for high-growth companies, particularly in sectors like healthcare and technology. Investors and firms alike are concerned about overpaying for assets, which could reduce future returns if market conditions become less favorable. The current valuation environment is also driven by high corporate profits in 2024, with non-financial corporate profits in the U.S. reaching $2.75 trillion.
• Exit Uncertainty: Uncertainty around exits has grown due to increased regulatory scrutiny and geopolitical tensions. The SEC has tightened its oversight on private equity, requiring more detailed fund disclosures and increasing reporting obligations in 2024. Additionally, geopolitical risks, such as trade tensions and U.S. sanctions on foreign investors, have created challenges for cross-border exits. In 2023, over $50 billion in U.S. private equity exits were delayed or canceled due to regulatory hurdles.

USA Private Equity Market Future Outlook

Over the next five years, the USA private equity market is expected to experience sustained growth, driven by increasing investor demand for alternative assets, the expansion of private debt strategies, and strong deal flow in high-growth sectors such as technology, healthcare, and renewable energy. Institutional investors are likely to increase allocations to private equity as they seek higher returns in a persistently low-interest-rate environment. Additionally, advancements in digital platforms for deal sourcing and due diligence are expected to enhance market transparency and accessibility.

Future Market Opportunities

• Healthcare and Biotech Investments: The healthcare and biotechnology sectors remain attractive targets for private equity due to strong growth potential and high demand for innovation in drug development. In 2023, private equity firms invested over $30 billion in U.S. healthcare companies, with biotech receiving nearly $15 billion. The U.S. FDA approved a record number of new drugs in 2023, further encouraging investment in the sector. With healthcare spending in the U.S. reaching $4.5 trillion in 2022, the sector provides robust opportunities for private equity investments.
• Secondary Market Liquidity: The secondary private equity market has become a significant avenue for liquidity, providing opportunities for investors to buy and sell stakes in private equity funds. In 2023, secondary market transactions totaled over $100 billion globally, with a large portion occurring in the U.S. This trend is supported by growing demand from institutional investors seeking to rebalance portfolios and exit older funds. According to the SEC, the U.S. secondary market grew by 15% year-over-year, with a high concentration in tech and real estate funds.