Assessing the Impact of Tariffs on Private Equity

Newsletter Review | April 2025

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Why Private Equity Holds Up When Markets Shake

While public markets react quickly to headlines, Private Equity tends to be more insulated. Its built-in illiquidity, with quarterly valuation updates, shields investors from daily price swings. In turbulent times, this structural stability becomes a real advantage, allowing fund managers to focus on operational improvement, diversification, and thematic investing. As a result, Private Equity has performed particularly well during turbulent macroeconomic times.

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Sector Positioning Provides Resistance

Private Equity fund managers’ sector allocation helps minimize the impact of tariffs on portfolio companies since they tend to concentrate on industries where innovation and intellectual capital drive value. A large share of top fund managers tends to focus on investment themes such as technology and healthcare rather than investing in import-dependent sectors like industrials and consumer goods. This focus helps buffer portfolios from tariff-driven cost spikes and supply chain disruptions.

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Dry Powder Enables Opportunistic Investing

The ability to act decisively during periods of disruption is critical. With high levels of dry powder, Private Equity firms are well-positioned to take advantage of market dislocations (i.e., lower valuations in public markets) and build long-term value. Current dislocations are creating attractive entry points for experienced managers with capital to deploy selectively, offering the potential to build value overtime. 

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