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| The Daily Pitch |
| PE, VC and M&A |
| Your edge on global private capital markets |
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| Safe travels! In today's Daily Pitch, we look at AI drug discovery startups, Q3 returns for publicly traded PE firms and rankings for VC hubs. |
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| As PE returns dip, credit buoys portfolios |
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By Rod James, Senior Private Equity Editor
The largest listed alternatives managers benefited from the strong performance of private credit in the third quarter as PE returns slipped from the double-digit growth achieved in the two prior quarters.
The PE portfolios of Apollo Global Management, Ares Management, Blackstone, Blue Owl, The Carlyle Group, KKR and TPG returned 8.9% during the third quarter on a trailing-12-month basis, some way behind the 17.6% return of the S&P 500 index.
Blackstone, whose corporate PE portfolio returned 13.6% gross, and TPG, which returned 12.9% across its growth and buyout strategies, were the top performers in the cohort.
This dip in returns was partly down to there being fewer realizations in the third quarter. Exits from PE portfolios among the Big Seven declined by 18.7% quarter-on-quarter to $18.3 billion, though executives continue to express confidence that lower interest rates will spur dealmaking.
"Directionally healthier markets, more liquid markets, better credit markets, better IPO markets; that's healthier for realizations," said Blackstone COO Jon Gray on an earnings call last month.
Meanwhile, the private credit portfolios of the so-called Big Seven achieved an aggregate TTM return of 12%, with five of the so-called Big Seven hitting double digits. |
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This outperformance is reflected in fundraising. Fifty-seven percent of the aggregate inflows of the Big Seven went into private credit, bolstered by new sources of capital, such as private wealth.
Tapping this channel gives managers access to scalable capital and fee-generating assets while making them less reliant on the support of tapped-out institutional investors, write PitchBook research analysts Jinny Choi and Kyle Walters in the Q3 2025 US Public PE and GP Deal Roundup.
This funding strategy brings risks. A flood of money into private credit is likely to put downward pressure on returns, particularly as there is a growing pile of capital competing to fund a relatively weak stream of PE deals.
"We are seeing a trend line up on deal flow, but not to the extent where buyers of paper have more leverage on pricing and terms," said Jeffrey Griffiths, global head of private credit at advisory firm Campbell Lutyens. "It's a good market for an issuer to go out and raise debt capital." |
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• AI is coming for drug discovery, and VCs are paying up for it. AI biotech companies raised $3.2 billion through September of this year, according to new PitchBook research—at a nearly 100% valuation premium to the rest of biopharma. Find out more
• While European AI valuations have hit an all-time high this year, the share of down rounds in VC deal counts has increased. As a record flow of capital into AI startups continues, many investors are expecting a market correction. Read more
• VC exit value in the enterprise SaaS market shot up in Q3 as AI fundamentally changes business software, according to our recent Emerging Tech Research. Read the report |
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| US VC ecosystem still finds plenty of room for growth |
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By Nalin Patel, Director of EMEA Private Capital Research
The US is cementing its position as the undisputed leader in VC, even as new regions rise and others falter. Our global VC ecosystem rankings explore how AI investment and geopolitical dynamics are redrawing the boundaries of innovation and growth worldwide.
According to the analysis, the US maintains a commanding lead across overall scores, which blend development and growth metrics. The former measures the size and maturity of a regional ecosystem, while the latter measures how locales are growing relative to their peers. |
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At the city level, San Francisco remains peerless in VC, topping development scores by a wide margin. Nashville's emergence at the top of the growth scores highlights how emerging US markets are gaining traction. And of the top 20 growth ecosystems, 14 are in North America, reinforcing how non-US hubs continue to lag in deal volume, round sizes and valuations.
Despite an overall placement of 19th, Saudi Arabia leads all countries in growth scores, overtaking Switzerland, which fell from first to third. The UAE ranks fourth in growth, while 11 new nations appear in this year's top 20—signaling broadening global participation despite the continued US dominance.
Unsurprisingly, AI remains the defining force of the current VC cycle. The US is the leader in the VC-funded AI race, with US AI investment during the reporting period exceeding that of the next 20 countries combined. In Europe, the UK, Germany and France are the top AI markets.
Fintech and healthcare show more regional diversity. India ranks third globally in fintech after the US and UK, while Europe dominates healthcare innovation, with its cities claiming 11 of the top 20 national rankings. Meanwhile, Boston reinforces its reputation as the world's premier healthcare hub outside San Francisco, affirming the enduring global reach of US-led innovation. |
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Smart reads that caught our eye.
• The accessibility of GLP-1s is shifting their marketing toward cosmetic weight loss. Despite drugs like Ozempic and Wegovy not being approved for people with BMIs below 27, telehealth companies are promoting potentially dangerous casual usage of GLP-1s. [Bloomberg]
• Longstanding investors in PE funds say the flood of money from individuals is costing them deals. Wealthy individuals are reshaping PE, and some institutional investors aren't happy about it. [The Wall Street Journal]
• Ahead of Black Friday, consumer faith in the resilience of the US economy is hitting another low. The affordability crisis continues in America, with weakness in consumer confidence and retail spending through November. [Financial Times] |
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