Private fund managers’ top 10 operational challenges of 2025

In recent years, uncertainty and increased regulatory scrutiny have been ongoing themes for private fund managers. Now, the new administration and the likelihood of deregulation have added unpredictability to firms’ ongoing operational and compliance challenges. The latest expectation is that the Trump administration will drive deregulation across the board, increasing uncertainty and the regulatory gap between the U.S. and jurisdictions abroad.

Many private fund managers are still grappling with last year’s hurdles, including keeping up with the digital transformation, cybersecurity risks, and rising operational costs. Firms that haven’t embraced the digital era are at greater risk of inconsistent practices, limited access to data, and insufficient security measures.

In our annual series for private fund managers, we’ve identified 10 key private equity challenges that will shape operations and compliance programs in 2025 and beyond. The challenges in the year ahead will require fund managers to be proactive, adaptable, and focused on innovation.

1. Uncertainty of a new administration

Every new presidential administration opens the door to potential regulations, deregulation, and enforcement changes. The Trump administration has signaled it will prioritize deregulation in many industries. The potential for consequential change creates uncertainty for private fund professionals and counsel, making it challenging to navigate compliance education and enforcement.

Preparing for new rules or rollbacks of old ones can be stressful and time-consuming. Private market managers must stay informed, engage with regulators, build adaptive processes, and ensure flexible compliance workflows. Investing in technology that can help firms quickly implement changes may be essential to providing a great experience for investors and remaining competitive.

2. Leveraging AI safely

While some firms are taking a “wait and see” approach to AI adoption for legal & compliance workflows, waiting too long could put your firm behind the curve and make it harder to compete against firms already leveraging AI tools to streamline workflows, eliminate manual tasks, and improve efficiency. Through such optimization, private markets professionals can focus on higher-value, strategic work to improve obligation compliance, investor relationships, and the dealmaking experience.

To begin the AI implementation process, private markets firms should carefully consider their unique needs and match them to the right tool or combination of technology and human expertise. Once you’ve identified your specific needs, seeking a reputable vendor that can meet those needs with a robust technology platform, a strong data security and privacy track record, and a history of experience in private markets is essential for success in 2025 and beyond.

3. Chevron overturned

When the Supreme Court overturned Chevron, it shifted the power to interpret ambiguous statutes from government agencies to the courts, potentially limiting agencies’ regulatory power. How this will manifest in 2025 is still unclear. Discussions have centered around actions taken by the SEC, while deference to other key regulators, including the IRS, EPA, NLRB, and FTC/DOJ, has also been eliminated. The ruling adds to the uncertainty for private fund firms navigating a complex global regulatory environment.

4. HSR reviews

The FTC has targeted private market funds with changes to the Hart-Scott-Rodino (HSR) Act filing process, which will likely go into effect by March 2025, in light of the new administration’s enactment of a regulatory freeze.

The new rules and antitrust scrutiny require greater disclosure about investors, businesses, and relationships, likely increasing the administrative work and transaction costs for those involved in M&A transactions. The industry expects M&A activity to pick up in 2025, and an increase in deal-making will trigger more HSR filings. The new filing requirements may support an enhanced approach to due diligence and disclosure of current and past acquisitions and supply chain relationships.

5. CTA litigation

On January 23, 2025, the U.S. Supreme Court lifted an injunction blocking CTA enforcement. However, reporting obligations remain on hold due to a nationwide injunction issued in a separate case. FinCEN confirmed that reporting is currently voluntary. Shifting court rulings and potential legislative changes create a fluid situation, and private fund managers are remaining vigilant. Even if the courts strike down the CTA, a modified version of the rule could go into effect down the line.

Ontra CEO Troy Pospisil spoke with The Wall Street Journal about the CTA litigation. Despite the current uncertainty around the CTA, many private equity firms have already completed their beneficial ownership information filings with FinCEN. The proactive approach taken by private equity firms demonstrates the broader value of maintaining well-organized entity information, regardless of the CTA’s status.

“It’s not wasted in any way. Having that info organized is going to be important to comply with other jurisdictions’ requirements and responding to know-your-customer requests,” said Pospisil.

6. CFIUS filings

As CFIUS becomes increasingly politicized, key changes create uncertainty regarding whether or not to make a voluntary CFIUS filing. The rise in CFIUS reviews, in general, has prompted some private equity firms to avoid voluntary filings. However, private fund managers may consider making voluntary filings in transactions with a significant risk of CFIUS review to avoid potential scrutiny and cost.

7. AML/CFT obligations

A recent FinCEN rule subjects certain registered investment advisers and exempt reporting advisers to traditional anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations by January 1, 2026. The new rule may require fund managers to implement a risk-based AML/CFT program, file certain reports such as Suspicious Activity Reports (SARs), maintain certain records, and fulfill other requirements.

Establishing and maintaining new processes and policies, enacting detailed information-gathering, and enhancing record-keeping procedures stretch lean teams thin while putting firms at risk of fines, sanctions, and even criminal penalties for non-compliance.

8. Investor expectations

Investors have become more sophisticated and are pushing for greater transparency and fee structures that better align with their interests. This heightened investor demand may force private market firms to shift priorities. Greater transparency, accurate fee calculation, improved valuation, and comprehensive disclosure practices may be necessary to remain competitive and retain investor confidence during 2025’s still-uncertain fundraising environment.

Private fund managers can take a proactive approach and sharpen their competitive edge by utilizing technology solutions to manage fee calculations, disclosures, and effective reporting. Failure to meet growing investor demands could result in fundraising challenges and strained investor relationships.

9. Balancing outsourcing vs. insourcing

Private fund managers traditionally rely heavily on external law firms for repetitive contract negotiation and compliance work. For managers that have already embarked on a digital transformation of operations, the availability of AI-powered legal tech is reducing that reliance and returning greater control over processes and costs to internal teams.

While outsourcing is still a viable solution — and the right option for many firms — some private fund managers are seeking a better balance between outsourcing and internal control. Adopting an approach that leverages the efficiency and consistency provided by a technology platform for private markets while keeping a human in the loop is helping fund managers optimize processes to achieve cost savings while meeting regulatory requirements, providing greater transparency, and accelerating deal times.

10. Retaining top talent

The war for talent has been an ongoing challenge for private market firms. Carnegie Consulting stated, “A 2024 report highlights that private equity firms, despite offering competitive salaries, are struggling to attract talent capable of managing the complexities of large, diversified portfolios under current economic conditions.”

Additionally, private equity firms are feeling pressure to hire tech-savvy leadership. Firms embracing technology solutions and AI are positioning themselves to attract top talent at all levels. While tech-savvy leaders may be in short supply, their expertise will be critical for handling the challenges of 2025.

Leverage Ontra’s AI-powered technology platform to overcome 2025 private equity challenges

The challenges facing private equity managers in 2025 are complex and interconnected. To navigate political and regulatory uncertainty and market challenges, leading private fund managers are focusing on adopting legal tech to streamline operations, boost efficiency, improve the LP experience, and attract top talent.

Ontra’s AI-powered technology platform for the private markets helps fund managers address these challenges, boosting efficiency and consistency while reducing costs and risks. From streamlining the negotiation and execution of repetitive contracts to providing valuable data analytics and centralizing entity management, Ontra allows private market managers to focus on higher-value work instead of getting bogged down in repetitive, manual tasks.