Fund trends
“Fundraising headwinds are really driven by exit shortfalls and LPs want to see distributions before recommitting. At the same time, we see some trimming of exposure to APAC, with allocations to countries like China reducing. Everyone is trying to find their safe spot in a situation of uncertainty, and that can lead to prolonged fundraising processes,” Pedersen says. Multi-strategy plays to mitigate fundraising dip When it comes to the strategic approach to mitigating fundraising challenges, 64% of respondents are expanding into different investment strategies, slightly up from the 59% that said they were doing this one year ago. The drive to diversify strategy is most prominent with EMEA respondents (74% compared to 57% one year ago). “If you only have exposure to a vanilla PE strategy, then raising new capital is going to be challenging, but if you also run a debt or infrastructure strategy then you should be stronger and better placed to fight the headwinds,” Comis says. An investment platform that offers investments in different asset classes can help GPs raise capital by presenting LPs with a wider variety of investment opportunities, which in turn offer a mix of risk-adjusted returns. Presenting a range of strategies can help smooth out fundraising volatility, as LPs pivot between different asset classes during economic cycles. The advantages of running multiple strategies have been evident so far in 2025. Unlike PE fundraising, private debt fundraising has proven robust during the first half of 2025, coming in well ahead of H1 2023 and H1 2024 figures, according to Private Debt Investor . Infrastructure fundraising has also increased through the first half of the year, with capital raised in H1 2025 already greater than the full year total for 2024, according to Infrastructure Investor . Managers already running a mix of strategies have reaped the benefits of diversification. “If you look at the very profitable firms over the past 10 years, they’ve become platforms running various strategies, and their funds under management have become bigger and bigger precisely as a result,” Comis says. “Adding a strategy, however, is complicated. You have to hire a team with the right track record and be able to articulate a new investment story to LPs.” We expect that consolidation in private capital will persist into 2026 as asset managers seek scale to offset fee pressure and provide broader access to private markets across distribution
The tough environment for portfolio company exits, and resulting lack of distributions to LPs from their existing funds, has continued to weigh heavily on sponsors’ ability to raise new funds. Preqin figures show fundraising dropping to a seven-year low during the 12-month period ending June 2025. In such a challenging market, the survey shows that GPs are facing a range of obstacles when bringing new funds to market. Fee pressure is the most commonly highlighted global fundraising obstacle, selected by 45% of survey participants as a top-three challenge. “GPs are under more pressure to manage LP expectations, mainly when it concerns the fee structure. Fee pressure is on the rise, especially with new assets and diversification requirements increasing further,” one respondent says. In a competitive fundraising market, managers are seeking to gain an edge by enticing LPs with reduced management fees, generous first-close discounts and more fee-free co-investment optionality. Bain & Company estimates that since the 2008 credit crunch, average net management fees have halved. GPs are having to strike a delicate balance between reducing fees to build fundraising momentum, while keeping fee income at a sufficient level to fund their day-to-day operations. Comis adds that GPs seeking to raise more capital from non-institutional markets, where there is greater sensitivity to fees, could also be a factor. The survey findings also reveal that GPs have to tread a fine line on environmental, social and governance (ESG) and diversity, equity and inclusivity (DEI) issues when raising capital from U.S. and European institutions, given the divergence in such policies between the two geographies. Some 47% of North American and 46% of EMEA respondents cited this as a top-three obstacle. “Europe and the U.S. are not on the same page when it comes to ESG. The regulatory differences are apparent, with Europe tightening the regulatory requirements. It’s difficult to bridge this gap,” a U.S.-based dealmaker says. Perceptions of fundraising obstacles, however, vary by jurisdiction, with APAC respondents more concerned about the negative market perception surrounding a slower fundraising process and the challenges in convincing investors that capital will be put to work quickly. Each factor was identified by 45% of APAC respondents.
20
Powered by FlippingBook