Canadian investors pull back from private equity

Canadian investors reduced investment in private equity (PE) in the second quarter, with deal value falling to $6.05 billion from $27.8 billion (all figures in U.S. dollars) in the first quarter, according to a KPMG report published Friday.

This marked the lowest level of investment since the third quarter of 2020, or in 19 quarters, the report said.

Deal volume also fell to a 20-quarter low of 104 in the second quarter, from 149 deals in the first quarter.

“It is expected that PE activity in Canada will remain quite dry until the uncertainties related to tariffs are stabilized,” the report read.

Latin America also saw a steep decline in PE investment, mainly driven by the uncertain U.S. tariff strategy. Many transactions that were in the works were paused at the beginning of the second quarter until the macroeconomic situation cleared up, KPMG reported. While some transactions returned after certain countries struck individual deals with the U.S. later in the quarter, they returned at a much slower rate.

Across the Americas, sectors perceived to be at lower risk from changing tariff policies received more interest from PE investors. Companies in energy ($43.4 billion) and infrastructure ($31.1 billion) saw robust funding in the first half of the year in the U.S.

The business services sector, such as accounting, also continued to see interest from PE investors in the Americas.

U.S. activity

Meanwhile, the U.S. accounted for $201.97 billion in proposed PE deployment across 1,608 deals in the second quarter, down from $264.5 billion in the first quarter.

President Donald Trump’s recently passed “big beautiful bill” is expected to have positive implications for PE, the report stated.

“Private equity was spared from major disruption, as the treatment of carried interest remains unchanged,” KPMG said. “The bill simplifies compliance with financial regulations — such as easing Dodd-Frank obligations and repealing Section 958(b)(4), which had complicated international tax structures — reducing administrative burdens and costs for portfolio companies with global operations.”

The report also flagged aerospace, defence and AI as sectors that could see more PE funding in the third quarter.

Jonathan Got

Jonathan Got is a reporter with Advisor.ca and its sister publication, Investment Executive. Reach him at jonathan@newcom.ca.