Private Equity
Article by Hugh Willet
Private equity managers have been hoping for a fundraising revival since 2022, when a sharp rise in interest rates began hindering institutional investors' ability to back new funds. Not only did the revival fail to come, but things have only gotten worse each year since.
Behind the headline numbers is a shift in LP sentiment that shows no sign of reversing. Investors are consolidating relationships and rewarding a handpicked group of managers, which has prompted many others to change tack. The shift carries significant implications not only for PE firms, but also for the people who work within them.
In the US, 2025 marked the year with the fewest private equity fund closes in more than a decade. Just 327 US PE funds reached final closes last year, the lowest count since 2013 and less than one-third the peak of 1089 funds raised in 2022, data shows. Together, those vehicles amassed a combined $278 billion, the lowest annual tally since 2020.
Investors have become increasingly picky about manager selection and are concentrating their allocations with a narrower pool of trusted managers. Mega-funds of $5 billion or more accounted for 49.2% of total capital raised for the industry last year, the highest share since the 2008 financial crisis, while vehicles between $100 million and $5 billion only raked in $138.3 billion, making 2025 their worst year since 2018.
Investors have rewarded firms that have shown the ability to produce distributions, rather than just impressive paper returns.
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