This new year is expected to bring fundraising headwinds for private equity unless exit activity rebounds significantly.
Several factors, including elongated timelines for fund closings, fewer fund launches and reduced contributions from mega-funds are set to cause the first significant decline in PE fundraising in five years.
In PitchBook’s 2025 US Private Equity Outlook, analysts explore these challenges affecting the fundraising landscape.
The median time for fund closings in 2024 increased to 16.7 months, up from 10.9 months at the end of 2022, in a trend last seen in 2010. This slowdown has resulted in less capital being raised and fewer fund closings.
A large portion of fundraising comes from mega-funds—vehicles raising $5 billion or more. They accounted for 46.5% of the total.
“Mega-fund managers are in their own league when it comes to fundraising,” said Kyle Walters, a PitchBook private equity analyst. “The amount of capital they are raising is substantial, and they are typically not in a rush to close these funds. Moreover, these funds are often deploying capital from a fund before it holds its final close. So, if their fund doesn’t close in 2025, it is not the end of the world.”
That said, mega-funds’ ability to secure capital dwindled last year. In 2024, the 10 largest open mega-funds secured 35.2% of their fundraising goals. In 2023, the largest open funds reached 72.3% of their capital-raising targets.
According to David Larsen, managing director of alternative asset advisory at Kroll, PE managers still have other avenues to attract new commitments.
“Many of the large managers have or are working on launching evergreen or retail fund strategies which allow them to tap into additional sources of capital beyond their historical constituents,” he said.
GPs are also raising cash with midlife co-investment deals to provide liquidity to investors.
“As with other co-investments, the arrangement allows LPs to invest directly in specific deals, bypassing the traditional fund structure and associated fees, while potentially realizing quicker and higher returns,” said Sean Collins, research manager at The Deloitte Center for Financial Services.
Collins added that midlife co-investments not only help PE firms raise new capital and provide liquidity to investors, but also strengthen relationships between GPs and LPs by better aligning expectations surrounding investments in specific portfolio companies and corresponding holding periods.
While PE managers focus on raising new vehicles, deal activity has outpaced fundraising. Managers are deploying dry powder that reached over $1 trillion in 2022, leaving a significant amount of capital to allocate.
Exits are key
Although signs point to a slower fundraising year, a key factor for 2025 will be exit activity. If the market experiences a pickup in realizations, PE managers may have capacity to receive new commitments from LPs.
“With the backlog of exits, some LPs may find themselves overallocated to the private markets and, as such, could delay new commitments,” said Larsen. “Yet, delaying commitments could cause a mismatch in vintage allocation in the future.”
Featured image by Nicola Margaret/Getty Images
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