31% of North American respondents believe that the Republican victory in November’s U.S. presidential election has the potential to boost portfolios, particularly for North American firms.
- Donald Trump’s victory in November’s U.S. presidential election was remarkable, but our research suggests that its impact on the investments currently held by PE firms is likely to be less significant, particularly outside of the U.S.
- There is some evidence that PE firms – particularly domestic investors – are concerned that President Trump’s second term in office will prove less supportive for their portfolios than a Kamala Harris victory would have delivered.
Prior to the election, 38% of PE firms taking part in our research felt that neither a Democratic nor a Republican election victory would have a more beneficial impact on their investments. Moreover, outside of North America, the figures were a great deal higher – at 69% and 60% in the EMEA and Asia-Pacific regions, respectively.
In contrast, domestic PE firms were naturally taking more of an interest in the outcome. Only 4% of North American respondents said the result would not make any difference to their portfolios. Almost two-thirds of North American PE firms in this research (64%) said they expected a Democratic victory to be more beneficial for their portfolio investments, against 31% who favored a Republican win in this regard.
PE is a mature industry that has shown over many decades that it can deal with whichever way the political wind is blowing – investors will focus on what they can control.”
Markus Bolsinger, co-head of Dechert's PE practice
One explanation for this split, suggests co-head of Dechert’s PE practice, Markus Bolsinger, is that PE firms were anxious about the uncertainties a Trump presidency might now entail: “It’s probably more predictable what would have happened under Harris, whereas that isn’t the case to the same extent with the incoming Republican government.”
It is also the case that a Democratic administration would have been expected to be more interventionist, with further investment in areas such as clean energy, infrastructure and housebuilding. Harris had talked about building on the Inflation Reduction Act, described as the single largest investment in climate and energy in American history.
President Trump’s efforts to support the U.S. economy will more likely be channeled through tax cuts, both for corporates and individuals. While this does have the potential to drive growth in several areas, there is also concern that the inflationary impacts of tax cuts could prompt an intervention from the U.S. Federal Reserve, with interest rates once again moving towards an upwards trajectory. That would disappoint many investors, given the Fed’s move to reduce rates by 50 basis points in September, its first reduction for four years; that lowered its target rate to 4.75-5%.
Overall, respondents do not appear to expect positive news on tax during President Trump’s second term, with 81% concerned about increased uncertainty on this issue. This likely reflects the president’s campaign promises to introduce high tariffs on imports of many foreign goods, which would, according to many economists, raise prices for middle-class consumers. Such tariffs therefore amount to the equivalent of an additional sales tax, potentially reducing consumption.
It's also striking that 85% of PE firms are concerned about increased regulatory uncertainty under President Trump, who has previously stressed the importance of reducing red tape on large parts of the business sector. That likely reflects the president’s more protectionist rhetoric, particularly towards trade partners such as China. However, domestic businesses in sectors such as oil and gas may feel more positive about what lies ahead, with the president on record as supporting the conventional energy sector.
For most PE firms, portfolio strategy is therefore likely to be tweaked in the months and years ahead rather than overhauled. More than three quarters of the firms taking part in this research (78%) are likely to make adjustments to geographies previously targeted – but less than a third of these respondents feel strongly in this regard.
The preceding article is an excerpt from the 2025 Global Private Equity Outlook report, an annual publication that uses qualitative and quantitative findings to look at current PE industry trends and views on where the market is heading in 2025.
