Navigating the challenges of private equity fundraising: strategies for success

The private capital landscape is experiencing one of its most challenging periods in recent history. According to the SS&C Intralinks 2025 Global Private Capital Fundraising Report, the market is undergoing a profound transformation driven by monetary policy shifts and significant economic headwinds. For fund managers and investors alike, understanding these fundamental changes is crucial for navigating today's complex fundraising environment.

The big freeze: central bank caution halts fundraising momentum

The numbers tell a stark story. In 2024, global fundraising activity experienced a dramatic downturn:

• Closed fund volumes declined by 45.1% year-over-year
• Capital raised fell by 18% compared to the previous year
• Activity levels dropped below pre-pandemic benchmarks

This marks another consecutive year of decline, with fundraising volumes now lower than what the industry saw before COVID-19 disrupted markets. The primary driver? Central bank caution in the face of persistent inflation.

Monetary policy remained at the highest levels of the decade, with US rates peaking around 5.3%. This elevated rate environment created a cascade of challenges. Borrowing costs for companies escalated sharply, weighing heavily on valuations across all asset classes. When assets are valued lower and borrowing becomes more expensive, dealmaking opportunities naturally decelerate, making it significantly harder to both identify attractive investments and raise new capital.

For fund managers, particularly emerging firms trying to establish themselves, these conditions created enormous hurdles. The direct result has been much longer fundraising timelines, forcing managers to swim upstream in an increasingly difficult environment.

Safety first: the flight to established managers

When capital becomes scarce, investors instinctively seek safety. The data reveals a clear and deliberate shift in limited partner (LP) preferences toward reputation, deep experience, and proven track records.

• First-time fundraising volumes fell from nearly 18% to just over 16% in 2024
• Of the 50 largest funds raised last year, almost all were managed by established firms
• The only notable exception was the Government of Oman's first-time $5.2 billion buyout fund

This flight to experience has had tangible consequences for fundraising timelines. The median time to close a fund rose from just under 15 months to over 18 months in 2024, nearly six months longer than the historical 12-month median. As of early 2025, this timeline remains elevated at 18.3 months.

These prolonged timelines create a pressure cooker environment for fund managers. Ironically, spending more time raising capital means less time to efficiently deploy it. This can lead to rushed investment decisions to meet deployment deadlines or a more reactive, less strategic approach to investing.

The caution has also driven significant capital consolidation. Since 2020, the share of funds exceeding $1 billion has steadily climbed from just over 5% to more than 9% of total fund volumes in 2024. Year to date in 2025, that share has already reached 12.5%. Median fund sizes across all fund types have never been larger, signaling a clear trend: the big are getting bigger.

The liquidity lifeline: secondary funds step up

Amid widespread downturn and consolidation, one segment has bucked the trend dramatically: secondary funds. These vehicles have provided crucial liquidity at precisely the moment when traditional exit avenues like IPOs and M&A activity significantly contracted.

Limited partners demanding returns and seeking portfolio rebalancing found secondary funds to be a vital pathway. The scale of this shift has been remarkable:

• Median secondary fund sizes nearly tripled in 2024, jumping from approximately $164 million to almost $600 million
• In EMEA, secondary fundraising's share of regional capital commitments rose from 7.9% in 2024 to 39% year to date in 2025

This isn't a regional anomaly but a global phenomenon. Secondary funds have effectively become a pressure release valve for an ecosystem starved of liquidity, offering investors a way to access returns when traditional exits remain challenging.

The dry powder paradox: record capital sitting idle

Perhaps the most striking paradox in today's market is the unprecedented amount of undeployed capital sitting on the sidelines. Global private fund managers are holding more deployable capital than ever before, yet deployment has slowed to a crawl.

• Cash on hand grew to a record 5.5 years by mid-2024
• Dry powder older than three years rose to 57.1% in 2024
• Total AUM rose slightly from $15.2 trillion to $15.5 trillion, but deployment lagged

Fund managers are adopting a far more cautious, strategic investment approach, prioritizing sustainable growth and applying greater selectivity rather than rushing to deploy capital into turbulent markets. They're waiting for the right moment and the right valuations.

Technology as the strategic differentiator

To navigate ongoing economic uncertainty and prepare for when dry powder finally deploys, fund managers are increasingly turning to technology. This isn't about minor efficiency gains anymore but fundamental transformation.

• Improving due diligence processes
• Providing deeper insights and fostering greater LP trust
• Reducing administrative burdens through automation
• Freeing managers to focus on strategic decisions

As dry powder continues to age and the market awaits the inevitable deployment surge, technology has evolved from a nice-to-have to an absolute necessity.

Strategies for success in a transformed market

The private capital market is in profound transition, characterized by caution, consolidation among experienced firms, a strategic pivot toward secondary markets, and deep reliance on technology. For fund managers seeking to succeed in this environment, several strategies emerge:

• Build and communicate track record relentlessly. Demonstrating consistent performance is non-negotiable.
• Extend fundraising timelines. With close times exceeding 18 months, realistic planning is essential.
• Consider secondary strategies. Explosive growth in this segment signals major opportunity.
• Invest in technology infrastructure. Digital platforms and analytics are now fundamental.
• Exercise patience in deployment. Selective, strategic investment approaches are proving prudent.
• Strengthen LP relationships through transparency. Technology-enabled insight sharing builds trust.

The question for the future is whether increasing reliance on technology will redefine what experience means for fund managers. Could technology level the playing field and create new opportunities for emerging firms even in a consolidated market?

As the industry continues to evolve, those who combine proven expertise with technological innovation will be best positioned to navigate the challenges ahead and capitalize on opportunities when market conditions improve.