Private capital delivered a 12.26 per cent total return for full-year 2025 – the highest level since mid-2022 – driven by venture capital (23 per cent), which significantly outperformed private debt and buyout, according to State Street.
Private markets strengthened further in 2025, with State Street private capital index trends for Q4 2025 showing returns of 2.86 per cent for the quarter.
“Venture capital sustained its momentum, delivering 6.67 per cent in Q4 and 23.27 per cent for the year, supported by strong rebounds in growth-oriented sectors,” the report said.
Venture capital’s outperformance was underpinned by strength in its core sectors: information technology and healthcare – which, according to State Street, continue to dominate venture portfolios and drive returns.
“In contrast, consumer and financials lagged, underperforming generalist strategies.”
Buyout and private debt posted more moderate but stable gains, with Q4 returns of 2.02 per cent and 1.49 per cent, respectively, and full-year returns just under 10 per cent.
The US maintained performance leadership in Q4, with Europe lagging as FX tailwinds faded. At the full-year level, however, Europe outperformed with a 17.1 per cent return, ahead of the US (11.92 per cent) and Rest of World (10.02 per cent).
Fundraising remained selective and liquidity-constrained throughout 2025, the firm said, continuing a four-year downtrend from the 2021 peak. Total capital raised declined to US$344.5 billion, led by buyouts (US$264.4 billion), with venture capital (US$44.3 billion) and private debt (US$35.8 billion) contributing more modestly.
Average fund sizes also contracted to approximately US$1.9 billion, down from US$2.4 billion in 2024, reflecting tighter capital allocation and increased selectivity among LPs.
“Despite slower fundraising, dry powder remains elevated at US$1.08 trillion, declining modestly year-over-year. This indicates continued capital overhang and reinforces a more disciplined deployment environment,” the report highlighted.
Meanwhile, public markets showed signs of deceleration in Q4, with the S&P 500 returning 2.65 per cent and the Russell 2000 at 2.19 per cent.
“While both trailed private capital during the quarter, they continue to outperform over longer investment horizons.”
