Private markets executives expect tailwinds from the Trump administration’s expected lighter regulations and lower taxes, but headwinds from new tariffs and other "America First" measures could disrupt their business outside the U.S.
“Under the current administration, the current SEC and FTC have pushed regulations and proposals that discourage long-term growth and make it harder to build businesses,” said a spokesperson for the American Investment Council, a private equity money manager trade group.
"We congratulate President Trump and all incoming members of the next Congress. We look forward to working together on a pro-growth tax policy and a responsible regulatory agenda that make it easier to build better businesses across our country," said Drew Maloney, AIC's president and chief executive officer.
Before the election, a majority of private equity managers showed concern that a Trump victory would increase uncertainty around taxes and regulation, according to the Dechert Global Private Equity Outlook 2025 based on a July survey of 100 GPs.
Sixty percent of the respondents agreed and another 21% of respondents said they “strongly" agreed that if Republicans won the 2024 U.S. election, there would be increased uncertainty surrounding taxes. Additionally, 54% of respondents agreed and another 31% "strongly" agreed that a Republican win would increase uncertainty surrounding regulation, the Dechert survey showed.
Speaking after the election, however, some managers said the election results eliminated much of the uncertainty. During Carlyle Group’s Nov. 7 earnings call, Harvey M. Schwartz, chief executive officer at $447 billion alternative investment firm, said that “the election has removed market uncertainty first and foremost. Markets like certainty.”
“I think that where we can feel much more confident is around regulatory touch, tax policy and all the things that will be really powerful for the market and for exits and for investing opportunities,” Schwartz said. “But there will always be these elements of uncertainty ... on the periphery, but we'll see how they resolve over time."
“Over the medium to long term, this should be a further catalyst for IPOs, M&A and key sectors we invest in,” Schwartz added.
On tariffs, Schwartz expressed less certainty.
During his campaign, President-elect Donald Trump said he would move to impose a universal baseline tariff on all U.S. imports of 10% to 20% and a 60% tariff on all U.S. imports from China.
Asked by an analyst during the call about the impact of tariffs, Schwartz said, “this is going to have to be a wait-and-see in terms of how policy gets implemented."
Tariffs are something that all industries will have to focus on moving forward, Schwartz said. “There are no unique issues for Carlyle,” he added.
Some industry insiders say that Trump’s relationships with private market top executives, including supporters Stephen A. Schwarzman, chairman, CEO and co-founder of $1.1 trillion alternative investment firm Blackstone, and Scott Bessent, founder of macro hedge fund Key Square Group, could sway the Trump administration' policies.
"From a policy standpoint, the incoming administration’s connections to private investment and venture capital may have an influence on regulatory approaches," said Jonathan Flitt, global head of alternative investment solutions at Clearwater Analytics, an investment accounting software provider.
“Policymakers with a deep understanding of the nuances of private markets may prioritize initiatives that promote capital flow and support new businesses,” Flitt said. The company went public in 2021 and had been a portfolio company of alternative investment firms including Welsh Carson, Anderson & Stowe; Permira; Dragoneer Investment Group and Durable Capital Partners.
Flitt said that historically deregulation plays “a pivotal role in transforming market dynamics.”
“As regulatory barriers are lifted, investors gain greater access to diverse asset classes and strategies, fostering an environment that encourages innovation and growth,” Flitt said.
The outcome of the election has both positive and negative aspects for the private capital markets, said Jeremy Swan, managing principal for advisory and tax firm CohnReznick’s financial sponsors and financial services industry practice.
"Under a Trump administration, there is expected to be a relaxing of regulations around bank lending, along with relaxing of reporting and disclosure requirements for private capital, climate disclosures and other areas," Swan said. The new administration could likely also make anti-trust review more predictable.” Swan said.
How carried interest is taxed will become less of an issue, he said.
What’s more, the Trump corporate tax cuts will likely be extended and “an expected lowering of the corporate tax rate will create a more favorable tax environment for U.S. firms and U.S. operations,” Swan said. “All of these will be positives for U.S. firms' earnings and valuations.”
Tariffs, 'America First' may hurt business
However, “a ‘U.S. First’ philosophy as well as national security priorities combined with potential tariffs will lead to further protectionism within the U.S.,” he said.
Combined with increased scrutiny of cross-border transactions and increased tariffs on foreign goods, especially from China, that “could limit the viability of many cross-border investments and transactions,” increasing the cost of doing business outside of the U.S., Swan said.
Some secondary market managers fear a slowing of transaction volumes on the private market secondary markets in 2025 compared to 2024.
The secondary market long-term outlook is strong in that the rise of the public markets usually means more capital will flow into alternative investments, said Matthew Swain, global head of secondary and direct private market investments at Houlihan Lokey.
“That said, the shorter-term environment (next 24 months) could be quite rocky for the secondary market,” Swain said.
Secondary investors will be wary of doing any continuation vehicle where a company has exposure to manufacturing offshore, he said.
“Further, Trump’s penchant to comment on industries' 'off the cuff’ could kill certain secondary deals as they are in process,” Swain said. “For example, a comment about a specific healthcare industry could kill a deal even if it’s a month or two into being run by an adviser.”
The volume of continuation vehicles could slow because traditional exits will be more common in a market where liquidity is abundant and valuations are high, he said.
“It may make sense for general partners to realize their carried interest in full in a favorable tax environment,” Swain said.
Swain also expects a slow-down in sales of limited partnerships on the private markets secondary markets as a rise in the public markets will reduce issues with the denominator effect. The denominator effect occurs when a drop in public market assets causes private markets portfolios to rise, sometimes above their target allocations.