Generalist private equity managers face a hard time fundraising as investors struggle to exit expensive deals
As the private equity industry has grown and matured, exit activity for older portfolio companies has come under pressure (Andrew Teoh/Unsplash)
Private equity fundraising remains muted as the industry grapples with unsold assets acquired at higher valuations. Industry leaders at the recent SuperReturn conference in Berlin said managers who fail to demonstrate value creation will struggle in fresh fundraising rounds as competition drives up asset prices.
John Romeo, head of Oliver Wyman's global private equity practice, told MandateWire Analysis on the sidelines of SuperReturn that the private equity market is now "harder than it was", as general partner businesses hold more portfolio companies than ever before.
As the private equity industry has grown and matured, exit activity for older portfolio companies has come under pressure, while traditional closed-end buyout funds continue to face fundraising headwinds.
In its recent midyear private equity report, Bain found dealmaking activity had fallen in value by more than half, to an estimated $145bn (£108bn) in Q2 2026 from $304bn in Q3 2025.
While McKinsey wrote in February that the value of buyout and growth deals above $500mn rose by nearly half (44 per cent) to more than $1tn in 2025, Bain's more recent market assessment found fundraising and exits had "dragged in the first half, and liquidity remained a major challenge".
Unsold assets bought at higher valuations
Investors are struggling to exit from a pile of unsold assets, which now total around $3.8tn across the industry, according to Bain.
Many of these were bought at higher prices by GPs as the market grew considerably and borrowing remained cheap, given the climate of zero-level interest rates. But as these assets come to maturity, many fund managers are struggling to exit at a reasonable valuation.
Scott Kleinman, co-president of Apollo Asset Management, told SuperReturn that investors and limited partners have had a "collective assessment" that the market "got a little out of whack" for vintages between 2017 and 2022, and "there's going to be a price to pay as far as what that means for private equity performance".
Kleinman said Apollo "[stayed] very disciplined on valuation over that timeframe, which means we have a lot less to apologise about right now".
But he added that "a lot of investors have built portfolios, layering in private equity that is going to underperform for those vintages".
He added: "You can't fix [the] purchase price, that's the reality of it."
Richard Damming, head of European private equity investments at Schroders Capital, echoed this assessment, telling MandateWire Analysis that while funds may have bought high-quality companies, they "overpaid, so it takes more time".
Given these challenges selling, some investors are stepping back from fresh private equity allocations.
MandateWire reported in March that the SKr800bn (£65.3bn) AP3 (Tredje AP-fonden) had paused its private equity activity in 2025 to "get more clarity on private equity funds' ability to divest old holdings at reasonable valuations", its chief executive Staffan Hansén said.
In the same month, Maria Björklund, head of alternative investments at the SKr1.4tn AP7 (Sjunde AP-fonden), said that "competition among investors has increased for the most successful funds, which have been able to demonstrate high returns combined with the ability to exit portfolio companies".
But fundraising pressure has also come from some larger asset owners already sitting at their desired allocation levels for private equity.
Damming says some of Europe's largest pension funds, including those in northern Europe, may have to "slow down" new investments unless they sell existing holdings, as they have already reached their target allocations.
Funds struggle to raise in tougher environment
Higher valuations, weaker fundraising and exit activity have all put pressure on the whole private equity model, which is "about buying [at] a good entry price, and then really driving value", Romeo said.
“When you see a fund out there trying to raise $5bn or $6bn and they end up raising $2bn or $3bn, then it’s really hard. If you’re a young talent, why on earth would you stay there?”
He argued the market has become "too efficient", increasing competition for attractive assets and driving up valuations. "Now... when you win a deal, you are probably willing to pay more than anyone else in the world for that asset," he explained.
In this challenging environment, Romeo said specialist managers are generating value and achieving higher exit valuations by being "really differentiated on how to create value". That includes deep sector knowledge and local market intelligence, maintaining close engagement with management teams and "tracking these companies for a long time".
But generalist middle-sized funds are "sort of stuck", he added. Without a "differentiated angle" for alpha generation, these funds are "going to have a hard time", he said. Weaker players may "raise something" over the next cycle, "but they'll never raise another fund".
Romeo said fundraising had become a key differentiator, with companies that miss fundraising targets struggling to attract and retain talent.
He said: "When you see a fund out there trying to raise $5bn or $6bn and they end up raising $2bn or $3bn, then it's really hard. If you're a young talent, why on earth would you stay there?"
Optimism for Europe's middle market
Despite the challenges, European private equity was identified as a bright spot alongside the secondaries market, scope to create value through AI and attractive buying opportunities in Asia.
Michael Halford, partner at law firm Goodwin and co-chair of its global private investment funds, told SuperReturn that 2025 was a record year for dealmaking activity in Europe, with the middle market remaining "one of the most active markets globally by [the] number of transactions".
"Europe recorded more private equity deal exits [than] in North America in the first half of 2025... which is very interesting," Halford added.
Indeed, MandateWire Analysis reported strong interest in European middle-market opportunities in April, with investors including the £120bn Border to Coast Pensions Partnership and the UK-based single family office Times 3 expressing an interest in the continent's mid-cap deals. From April 2025 to the end of last year, Border to Coast committed more than £200mn to funds focusing on mid-sized private equity deals.
Other bright spots include the growth of GP-led secondaries, which Halford said had tripled to $115bn in value during the past five years.
He added that nearly half of managers "are thinking about or actually doing one to unlock liquidity".
Gabriel Caillaux, General Atlantic co-president, told the audience there was an "exceptional" buying opportunity in the Chinese market.
"We're all kind of staring at the Hong Kong exchange with some very large offerings in tech that are coming. If that works, I think you'll see capital flow back. There's a huge window of opportunity into China," he said.