Tariff-fuelled volatility killing private equity optimism as deal flows squeezed

[SINGAPORE] In just three months, private equity markets’ initial optimism for a busier year has largely dissipated. Instead, the turmoil unleashed on global financial markets by US President Donald Trump’s “Liberation Day” tariffs is quashing activity in private equity (PE), particularly as billions of dollars worth in mergers and plans for initial public offerings (IPOs) are halted.

Managers of PE funds, also known as general partners (GPs), rely on deal flow to exit and generate returns for their investors, which typically include pension funds, sovereign wealth funds and insurers. The cautious mood in PE is a vast turnaround from the anticipation that the second Trump administration would fan increased activity in mergers and acquisitions (M&A) and IPOs amid expectations of fewer regulations and lower taxes.

“The level and the broad nature of the tariffs have thrown a wrench into that (optimism)... but we will have to wait and see how things evolve. But yes, in the near term, the exit activity that was supposed to be led by IPOs and M&A has come to a halt,” Nitin Gupta, managing partner at Flexstone Partners, an affiliate of Natixis Investment Managers, told The Business Times.