Across the board, every major private asset class has recorded an improvement on its Q1 return
[SINGAPORE] Private markets delivered their strongest aggregate returns since 2021 in the second quarter of 2025, signalling a recovery phase following a period of valuation cool-offs, a report by MSCI indicated.
Across the board, every major private asset class recorded an improvement on its Q1 return.
MSCI used its newly launched private assets classification standards – an artificial intelligence-powered managed data service that applies consistent sector tagging of private assets at scale – in this quarter’s analysis of private market performance.
This positive shift occurs amid a transitional market environment characterised by selective reopening of the initial public offering window and continued growth in the secondary market, which is acting as a crucial release valve for pent-up supply and helping the market rebuild liquidity, the report suggested.
Performance surge across asset classes
The strong Q2 performance saw key private market indices demonstrate notable momentum.
The MSCI Global Private Equity Closed-End Fund Index returned 4.2 per cent for the quarter, building significantly on its 1.9 per cent return in Q1. Within private equity, buyout strategies continued to deliver steady performance, returning 4.1 per cent. Venture capital posted even stronger returns at 5 per cent.
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Meanwhile, private credit continued its impressive run, with senior credit delivering its best quarterly result in a decade at 4.8 per cent. Senior credit refers to debt that must be repaid first in terms of priority.
This stability was complemented by healthy liquid-credit markets during the period, providing sponsors with more flexible capital structures to achieve their liquidity goals, said Luke Flemmer, head of private assets at MSCI.
But MSCI flagged that dispersion within credit is widening, with distressed performance in lower quality debt and concern that could spread to higher grade debt such as senior and mezzanine.
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“This could be an early warning sign of strain on broader markets,” said the report.
Real assets also showed signs of life; while real estate’s recovery remains modest at 1.3 per cent, infrastructure was a standout performer, gaining 4.8 per cent.
Where the capital is flowing
A breakdown of global valuation by industry highlights the key sectors dominating the major private market categories as at Q2 2025:
Dry powder declines as managers deploy capital
Total dry powder, or uninvested cash, across private markets has been declining steadily since its peak at the start of 2024.
Since the Q1 2024 peak, total dry powder across private markets is down roughly 8 per cent.
This could suggest that managers are investing capital rather than sitting on the sidelines, indicating opportunities in the current market.
Drilling down into specific segments, dry powder in private equity fell by 6 per cent since the peak, while real assets saw a steeper contraction of 17 per cent from its 2024 peak.
Even private credit, which peaked earlier in Q3 2022, has seen its dry powder figure drop by about 14 per cent since then.
Coupled with rising entry multiples for quality assets, it indicates a growing confidence among investors to pursue and secure new opportunities in a market that appears to be rebuilding liquidity and strategic momentum.
