Key Insights on Transforming the PE/VC Partner Lateral Market

The private equity and venture capital partner lateral market experienced dramatic shifts in 2024-2025, with declining movement velocity alongside sector consolidation and geographic redistribution reshaping hiring strategies. Partner moves dropped 28% industry-wide as firms became more selective, while artificial intelligence captured one-third of all venture funding and emerging hubs like Miami gained ground against traditional centers.

This transformation reflects broader market pressures: $1 trillion in dry powder awaiting deployment, extended holding periods averaging 6.4 years, and limited partners prioritizing distributions over growth for the first time since 2015. The result is a bifurcated market where mega-funds with substantial resources continue aggressive hiring while mid-tier firms face fundraising pressures that constrain talent acquisition.

Partner Movement Patterns Reveal Market Stress

Partner lateral activity contracted sharply across major markets, with New York recording only 9 partner moves in the first half of 2025 - a 50% decline from 2024's full-year total. Private equity partner laterals fell 28% from 25 moves in 2023 to 18 moves in 2024, reflecting what recruiters describe as "cautious and deliberate" hiring practices replacing the aggressive expansion of previous years according to Legal.io's 2024 hiring analysis.

The decline stems from multiple factors: challenging market conditions made partner "books of business" appear less attractive, higher compensation levels forced firms to be more circumspect about additions, and geopolitical uncertainty created hesitation in major hiring decisions as reported by Above the Law. Movement patterns now concentrate between large-scale, multi-strategy firms with sufficient capital reserves rather than the broader lateral activity seen in previous market cycles.

This constraint in partner mobility particularly affects mid-tier firms struggling with fundraising, creating a clear bifurcation between well-capitalized mega-funds that can invest in talent during challenging times and smaller firms forced to contract their hiring ambitions. For specialized support in navigating these complex market dynamics, visit our PE/VC practice page.

Compensation Trends Show Resilience Despite Headwinds

Private equity and venture capital compensation demonstrated modest growth in 2024, defying expectations of flat performance amid market challenges. Partners and managing directors saw increases most pronounced at funds with $6-9.99 billion in total AUM, while carry allocation standards remained remarkably stable with 20% structures dominating across strategies.

Geographic premiums persisted with San Francisco commanding a 6% premium over national medians and New York maintaining a 5% advantage, while remote positions face an 11% discount reflecting the industry's preference for in-person collaboration as documented by Transacted's compensation analysis. The compensation structure reveals significant fund-size advantages: associates at mega-funds ($10B+) earn median salaries of $365,000 compared to $230,000 at sub-$500M funds - a 37% premium that extends throughout organizational levels.

Carried interest allocations show concentration at senior levels, with 83% of partners receiving over $3.5 million in carry allocation and 41% receiving more than $10 million. Management fees remain under pressure with venture capital averaging 2.05% during investment periods while direct lending commands the lowest fees at approximately 1.5%, reflecting competitive dynamics across different strategies as outlined in Preqin's 2024 fee analysis.

AI Dominance Reshapes Sector Investment Flows

Artificial intelligence emerged as the dominant force in venture capital with $131.5 billion in global funding in 2024 - representing 33% of all VC investment and a 52% jump from 2023 according to Bain & Company's global VC outlook. All five largest U.S. venture deals went to AI infrastructure companies, with landmark transactions including Anthropic's $3.5 billion round and OpenAI achieving an $80 billion valuation.

Healthcare technology experienced a 50% year-over-year increase to $15.62 billion in 2024, reaching its highest level in two years with three billion-dollar-plus deals as reported by S&P Global Market Intelligence. New Mountain Capital raised $15.4 billion for healthcare tech-focused investments - the largest fund closure of 2024 - while Summit Partners closed a $9.5 billion growth equity vehicle focused on the sector.

Energy transition investments increased by 7,300% over five years, with buyout and growth equity funds investing approximately $160 billion in energy transition deals since 2017. LinkedIn currently shows 662 renewable energy private equity positions, while firms like Blackstone's Energy Transition Partners and Brookfield's climate funds lead the sector expansion. Our process for partner placements helps navigate these evolving sector demands.

Geographic Shifts Challenge Traditional Hub Dominance

The geographic distribution of private equity and venture capital activity underwent significant realignment, with California capturing 48.79% of all U.S. VC funding in 2024 - up from 39.69% in 2023 - while emerging hubs experienced mixed results in their challenge to coastal dominance according to Carta's geographic funding analysis.

Miami achieved breakthrough status as a top-five metro for VC activity, experiencing a 12% jump in AI roles and attracting major PE firms including H.I.G. Capital ($59B AUM) and Starwood Capital ($115B AUM). The city's advantages - no state income tax, Latin American market access, and pro-business regulatory environment - position it as a sustained competitor to traditional hubs.

Austin faced significant headwinds with startup headcount dropping 6% at VC-backed companies and its share of U.S. VC capital falling from 10.19% in Q1 2023 to 2.32% in Q1 2024. Infrastructure challenges and cultural mismatches with return-to-office policies favoring traditional hubs contributed to the decline.

Denver emerged as an unexpected winner, with market share jumping from 1.94% in 2023 to 3% in 2024, ranking sixth in state funding leadership. Major firms like Bow River Capital ($3.6B AUM) and Platte River Equity demonstrate the region's growing sophistication across aerospace, defense, healthcare, and technology sectors.

Limited Partner Priorities Shift Toward Distributions

Limited partners fundamentally altered their evaluation criteria, with 2.5 times more LPs ranking distributions-to-paid-in capital (DPI) as "most critical" compared to three years ago - marking the first time since 2015 that distributions exceeded capital contributions in the first half of 2024 according to McKinsey's Global Private Markets Report 2025.

This shift reflects LP frustration with extended holding periods and reduced liquidity, as private equity firms hold 30,000+ assets awaiting monetization with 35% held over six years. The emphasis on distributions over growth metrics represents a fundamental change in how LPs assess general partner performance and influences hiring decisions toward professionals with operational expertise rather than pure deal-making capabilities.

ESG requirements intensified with over 70% of LPs adhering to investment policies with ESG approaches, representing 76% of current PE assets under management as documented by EY's Private Equity Pulse Q2 2025. This translates to increased demand for professionals with sustainability expertise and diverse hiring requirements, as 46% of global PE firms established gender and ethnically diverse hiring targets. Learn more about our commitment to ethical standards in our pledge to partners.

Regulatory Landscape Shows Mixed Evolution

The regulatory environment experienced significant shifts with the Fifth Circuit Court vacating the SEC's Private Fund Adviser Rules in June 2024 - rules that would have required quarterly reporting and prohibited certain activities. The SEC's decision not to appeal creates regulatory uncertainty while maintaining existing enforcement priorities according to Ropes & Gray's market analysis.

International regulations continue advancing, with AIFMD 2.0 scheduled for April 2026 implementation in the EU, requiring enhanced disclosure and harmonized direct lending fund regimes. This regulatory complexity increases demand for compliance professionals and legal specialists with cross-border expertise.

The Supreme Court's SEC v. Jarkesy decision requiring jury trials for certain enforcement actions and the overturning of Chevron deference reduce agency rulemaking authority while maintaining focus on fiduciary obligations and recordkeeping compliance - particularly regarding off-channel communications as outlined in Cooley's fund formation analysis.

Spin-Out Activity Accelerates Amid Megafund Constraints

Partner departures from large funds accelerated in 2024, with "an unusual number of investors working on new firms" as veteran professionals seek smaller, more nimble structures according to The Middle Market's analysis. Notable spin-outs include Chemistry's $350M fund launched by partners from Bessemer, Andreessen Horowitz, and Index Ventures, and Benchstrength's $62M early-stage vehicle from ex-General Catalyst leadership.

These departures reflect frustration with megafund constraints and desire for independent decision-making, though fundraising remains challenging with total commitments to first-time funds dropping to $26.7 billion in the first three quarters of 2024 - the lowest level in years.

GP-led secondaries raised $102 billion in 2024, pushing total assets under management to $601 billion as alternative liquidity mechanisms gain prominence according to Bain's Private Equity Report 2025. Continuation vehicles grew fourfold over five years while co-investment volume increased approximately 30% since pre-pandemic levels, creating new structural options for spin-out managers.

Fund Formation Faces Concentrated Capital

The fundraising environment demonstrated continued consolidation with fundraising concentration reaching highest levels in over a decade as LPs favor established, large managers. While aggregate capital raised remained stable at $330 billion in the first half of 2024, deal count decreased significantly from 580 to 365 fund closings according to McKinsey's private markets analysis.

Median anchor investor checks for $100-250M funds rose to $35 million in 2024 - a 79.5% increase since 2017 - while the median number of LPs declined 43% from 2022-2024. This "flight to quality" pattern sees fewer investors writing larger checks to established managers, creating barriers for emerging and first-time fund managers.

Industry data providers consolidated as BlackRock acquired Preqin for $3.2 billion while PitchBook enhanced machine learning capabilities under Morningstar ownership. This consolidation increases data sophistication but also costs for market participants conducting ongoing research and due diligence.

Industry Outlook Balances Optimism with Caution

The private equity and venture capital markets show signs of stabilization with increased deployment activity expected by 66% of surveyed investors for 2025. Technology sector dominance continues with 30% of deal volume in the first half of 2025, while private credit provides increasing leverage with $22 billion for LBOs in Q2 2025 - the highest level since Q2 2022 according to EY's industry insights.

Dry powder deployment remains the critical challenge with approximately $1.2 trillion in unspent capital, 24% aged four or more years. Extended holding periods averaging 6.4 years for 2023 exits create pressure for operational value creation over traditional financial engineering approaches.

Fund formation trends suggest continued bifurcation between large, well-capitalized firms able to invest counter-cyclically in talent and smaller firms forced to contract during challenging fundraising conditions. Geographic diversification accelerates with tax-advantaged locations gaining share, while sector specialization in AI, healthcare technology, and energy transition drives premium compensation for specialized professionals.

The talent market reflects these broader dynamics: firms prioritize operational expertise, fundraising capabilities, and sector specialization while maintaining selectivity in partner additions. Success in 2025 depends on combining patient capital deployment with best-in-class operational and fundraising talent - creating opportunities for proven professionals willing to navigate an increasingly sophisticated and concentrated industry landscape.

For confidential discussion about your PE/VC lateral move strategy, contact our specialized team or explore our comprehensive placement process.