Tariffs: the Rede LP Pulse Check Report, Volume 1
Rede Partners is pleased to publish the first edition of its LP Pulse Check, offering a snapshot insight into evolving LP sentiment in the wake of President Trump’s announcement of wide-ranging tariff increases on April 2nd, 2025. Our analysis is based on a series of in-depth conversations with 25 institutional investors between April 10th and April 22nd, 2025. We continue to monitor events as they unfold and look forward to sharing further Pulse Check Reports with you in due course.
Key findings from the report:
1. When it comes to LP deployment, cool heads prevail
Despite alarming headlines and high levels of public equity volatility, LPs are not making knee-jerk changes to their investment programs. 83% of LPs say they are taking a ‘business as usual’ approach, while another 11% say they are ‘still figuring it out’ before making changes. A small minority (6%) are actively re-considering commitments to more transactional commitments such as continuation vehicles or co-investments valued off of 12/31 market prices. Notably, no LPs indicated that they would are halting work on private portfolios or reconsidering anticipated private fund commitments. Rede has not yet heard from any LPs about a realistic ‘denominator effect’ concern but many have noted that they will be on the lookout for this in the year ahead. Meanwhile, certain groups of LPs, such as endowments and foundations, are facing added layers of uncertainty due to disagreements between the Trump Administration and prominent universities, with potential for freezing of federal funds and introduction of an endowment tax. We expect to dive deeper into this subject in our next LP Pulse Report.
2. Exit momentum in jeopardy
Many LPs were hopeful for a return to stronger exit momentum in 2025 after several years of slow DPI. This optimism now appears to be evaporating in the face of concerns around the extent and impact of global trade barriers, market uncertainty, widening bid/ask spreads and delayed decision making. 77% of LPs expect an overall slowdown in exit momentum within their portfolio this year, while 14% believe total liquidity for the year will be unchanged. No LPs expect the tariff announcements to increase their distribution flows this year. Beyond exits, an overall slowdown in dealmaking is also expected to impact GP deployment, with 62% of LPs expecting to see reduced GP investment flow.
3. Portfolio valuations set to dip
62% of LPs expect to see a fall in unrealized portfolio valuations over coming quarters. However, none currently believe the impact on their portfolios will be ‘severe’ and only 8% of LPs believe the impact will be ‘moderate.’ The majority (54%) believe impact will be ‘limited,’ while a significant minority (38%) believe it is too early to tell.
4.Shifts in sector and regional appetite still to crystallize
Around a third of LPs currently believe that recent market events will result in a shift in their sector focus (38%) or geographic focus (31%), with many believing that it is still too early to tell what changes will be made. LPs considering a sector shift typically indicated a preference for strategies such as business services and healthcare that may offer insulation from global supply chain disruption. LPs considering geographic shifts noted the benefits of diversifying geographic exposure beyond North America, which remains the largest geographic portion of LP portfolios – although investors are typically more interested in adding European exposure than exposure to the Asia-Pacific region.
5. Concise, early GP communication is preferred
Most LPs prefer that their GPs maintain transparent, timely communication during this period of uncertainty. 46% of LPs expressed a preference for GPs to share a brief report laying out pertinent details of the expected impact of tariffs and their planned response. Another 27% preferred to address the topic in a dedicated video meeting, to allow for greater interaction and nuanced communication.