Rate Cuts Reshape PE Landscape

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

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📈 MARKET MOVERS

• 💰 Atlas Holdings Pays Premium for Operational Opportunity Atlas Holdings agreed to acquire Office Depot parent ODP Corporation for roughly $1 billion, betting their industrial sector knowledge can accelerate the company's B2B transformation. This shows PE firms hunting operational improvements rather than waiting for distressed opportunities. Read the details →

• 🏦 Apollo and EQT Make PE Access Reality for Retail Trade Republic's partnership with Apollo and EQT brings private market investing to over 10 million European users with €1 minimums and monthly redemptions. While others debate retail PE access, these firms already built the infrastructure. View the analysis →

• 🌍 Middle East PE Market Hits Record Pace MENA private equity investment reached nearly $14 billion across 100 deals in H1, positioning 2025 to break the $20 billion barrier for the first time. KKR's Gulf Data Hub investment highlights the AI infrastructure build-out driving regional deals. Get the insights →

• 🏛️ SEC Maps Retail PE Access (Finally) The SEC's Investor Advisory Committee released framework recommendations for bringing private markets to individual investors through registered vehicles. Monthly redemptions for interval funds signal regulatory acceptance of retail PE expansion. Read the analysis →

🔍 DEEP DIVE

The PE Rate Cut Story Everyone Missed

Everyone's talking about the Fed's September rate cut. PE firms started positioning three months earlier.

U.S. buyout transaction volumes jumped 17% year-over-year in the first half of 2025—before Jerome Powell touched interest rates, according to PitchBook data cited by Partners Group. While CNBC debated Fed timing, PE managers were already signing term sheets. They didn't wait for cheaper money, they created the conditions to benefit maximally from cheap capital

The Real Numbers Tell a Different Story

PE-backed exits surged 72% year-over-year through the first half, as Partners Group analysis shows. Not after rate cuts started. Before.

The signal here is simple: PE firms positioned portfolio companies for exits during the high-rate environment, then captured the valuation boost when rates began declining. IPOs now represent the highest percentage of PE exits since 2021. That showed deliberate preparation rather than chance.

The best firms saw this coming. While public market investors focused on inflation data, PE managers were preparing companies for a lower-rate world. Operational improvements during expensive capital periods. Strategic positioning for cheaper refinancing. Exit preparation months before market conditions turned favorable.

Why This Matters More Than the Headlines

Rate cuts don't just reduce financing costs. They highlight how PE strategies positioned during tighter conditions can now compound returns.

Take floating-rate debt. Most PE-backed companies carry SOFR-linked borrowings. A Fed cut flows directly to cash flow improvement. But smart PE firms didn't wait—they negotiated refinancing options during the high-rate period.

The financing advantage compounds:

• Lower borrowing costs enable add-on acquisitions

• Improved cash flows support higher dividend recaps

• Better debt terms create exit optionality

PE firms that positioned correctly turn monetary policy into multiple expansion opportunities.

Infrastructure and real estate show similar dynamics. Cap rates should compress as Treasury yields decline, supporting price recovery in assets that remain roughly 12% below 2022 peaks in most sectors. But PE real estate managers already accumulated quality assets during the discount period.

The Operational Edge

Here's what conventional analysis misses: PE success during rate cuts comes from operational positioning, not financial engineering.

Interest coverage ratios across private credit portfolios hit bottom and started improving months before rate cuts began, per Partners Group research. Portfolio companies reduced costs, improved margins, strengthened market positions. When cheaper financing arrived, these companies captured maximum benefit.

So why did exits climb before the cut? The operational improvements gave managers more ways to act when conditions shifted.

How PE Is Shifting Its Playbook

The industry evolved from opportunistic capital to strategic partner. Modern PE doesn't just buy during distress—it positions for multiple scenarios.

Firms maintaining operational expertise can generate returns across market cycles. Rate cuts simply provide favorable conditions for executing strategies already in motion. That was the advantage of early positioning.

Next Steps for Managers

The rate environment creates execution opportunity for firms that positioned correctly. Transaction activity should increase as financing costs decline and exit markets improve. But the returns will flow to managers who prepared during challenging conditions, not those chasing rate-driven opportunities.

Recent cycles suggest PE returns hinge less on policy timing and more on operational positioning. The September rate cut amplified returns for strategies already in place.

Allocators are increasingly highlighting optionality as a differentiator among managers.

🧰 TACTICAL TAKEAWAYS

• Ask managers what they bought before September. The firms generating returns during rate cuts started positioning months earlier. Look for PE managers with strong Q1-Q2 deployment activity that preceded monetary easing—these demonstrate strategic positioning rather than policy dependence.

• Focus on exit-ready portfolios with proven timing. With PE exits up roughly 70% year-over-year and IPOs at the highest percentage since 2021, prioritize managers with portfolio companies approaching exit windows. Next time someone questions PE's timing ability, show them these deployment numbers.

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 📊 KKR Maps the New Investment Regime KKR's latest Global Wealth Investment Playbook identifies a "new investing regime" driven by elevated inflation volatility and structural rate changes. The firm projects 11.5% annual PE returns over five years, supported by control-equity positions enabling value creation. View the analysis →

• 🇪🇺 European IPO Revival Gains Momentum September marked Europe's IPO activity in over 18 months, with companies across fintech, defense, and energy sectors launching debuts. Bank of America's equity capital markets team called this quarter the "standout story" as private equity firms view public listings as viable exit routes again. Get the insights →

• 💼 Legal Market Data Shows PE Transaction Strength Ropes & Gray's Q3 analysis reveals deal values increased 30% year-to-date through August despite 5% decline in transaction count, indicating larger average deal sizes. The secondaries market exceeded $100 billion in H1 transaction value while PE fundraising tracks 4% above 2024 levels. Read the strategy →

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The OneFund Team

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