Q3’25 Pulse of Private Equity

PE investment in Asia remains soft amid geopolitical uncertainties

As of the end of Q3’25, PE investment in Asia totaled $93.5 billion; at the current level of investment, 2025’s annual total is expected to come in well shy of levels seen over the last five years. A significant slowdown in PE investment in China likely accounts for much of the difference. At the end of Q3’25, PE investment in China was just nearly $11 billion across 123 deals, compared to $32.8 billion across 300 deals during all of 2024.

Geopolitical and trade tensions keep PE deal volume quiet during Q3’25

Heading in 2025, PE dealmaking in Asia was anticipated to rise significantly, possibly even matching the levels seen in 2020, 2021 and 2022. The reality has been a much different story. At the close of Q3’25, deal volume in Asia was visibly subdued at 835 deals — well off the pace needed to match 2024’s total of 1,300 deals and barely half of the deal volume seen in 2021.

Geopolitical tensions and tariff uncertainties continued to keep many PE investors from completing deals during Q3’25. While PE investment rose from $21.2 billion to $30.6 billion quarter-over-quarter, the number of deals fell to 253 — a level not seen since Q2’20. While PE investors in Asia are well-used to geopolitical shifts and large changes in government policy, the unpredictable nature of the US’s tariff strategy has made deal modeling challenging. Until these uncertainties settle, PE investment in the region will likely remain quite muted.

China’s PE market continues to faulter

China’s PE market continued to struggle in Q3’25. The current trade and tariff tensions between China and the US, is still a weak domestic economy, and the longerterm trend of global companies shifting their supply chains to other jurisdictions in Asia in order to build resilience have combined to sink PE investment in the country. During Q3’25, China saw just $4 billion invested across a record low of 24 announced PE deals — the latter a substantial drop from the 62 deals closed in Q3’24.

AI becoming an enabler of value — particularly in healthcare

Outside of Japan and Australia, the rising middle class remains a major influence on PE investment decisions in Asia, driving interest in sectors like financial services, healthcare, education, and e-commerce in order to address evolving consumer needs. This has led some assets — particularly in the healthcare space — to be valued extremely highly, making it critical for PE investors to be confident that they can sustain that valuation premium when buying assets. For PE investors, this is where the AI plays are predominantly coming in in Asia — as a way to drive operational efficiencies, take out a lot of headcount through automation, and enable value.

Availability of dry powder keeping fundraising activity low

The amount of dry powder in the PE market remains very high in Asia, which has kept fundraising activity quite low this year compared to historical trends. While many global asset managers and asset allocators still believe that the private markets give superior returns over time to the public markets — and still show a strong preference to allocate funds to private equity, private credit, infrastructure, and real estate — few are willing to invest additional capital in the space given current market realities. This has made it particularly difficult for small funds with less of a track record to raise money compared to their larger and more proven counterparts.

Trends to watch for in Q4’25

Looking ahead to Q4’25 and beyond, there are still some concerns around the geopolitical environment and US policy decision-making. If policymaking continues to be unpredictable, PE investors in Asia will likely continue to hold back from making major deals. More positively, if the geopolitical environment stabilizes, the PE environment will likely improve rapidly across the whole deal cycle.

Public-to-private transactions are expected to gain more interest over the coming quarters given the number of companies with moribund valuations making them attractive to PE investors. AI is also expected to rise on the radar of PE investors, although predominantly as an indirect play rather than a direct one.

Over the longer term, South Korea is expected to be a key market to watch, with expectations that it could see a similar boom in PE investment to Japan.

The reality is there’s still concerns on the horizon around the US — both the stability of its policy, but also frankly the US economy appears to be slowing and that has indirect flows into a lot of decision-making. I think if we get a more stable geopolitical environment — and I know that’s a big if — then conditions will or should rapidly start improving in terms of deal deployment and exits. But if we still have signs of erratic policymaking and tariff uncertainties, some PE investors will likely just sit back and go, ‘This is a bit too hard. Let’s just wait and see’ or ‘lets focus entirely on the (fewer) deals not exposed to such forces’.

Andrew Thompson

Partner, Asia Pacific Head of Private Equity

KPMG in Singapore