Private Equity Fundraising Hits Lowest Level in 7 Years

Private equity (PE) operations are reportedly struggling to raise funds despite offering investors unheard-of incentives.

Fundraising among PE firms came to just $592 billion in the 12 months to June, the lowest total in seven years, the Financial Times (FT) reported Sunday (Aug. 24), citing data from Preqin.

This downturn happened even with PE outfits offering discounts like management fee cuts, “early-bird discounts” for investors who sign on quickly to new funds and other enticements.

They “are offering a smorgasbord of discounts,” said Marco Masotti, global head of private equity fundraising at law firm Paul Weiss, who added that PE firms were “facing mounting fee pressure and agreeing to a cascade of discounts.”

Fundraising among PE firms is down by almost a third from unprecedented levels in 2021. Higher interest rates and a slowing dealmaking have left PE outfits unable to sell off trillions of dollars worth of aging investments, the report said. This has led to increasing frustration among investors, many of whom are now refusing to back funds.

The FT noted that dealmakers had hoped that the election of Donald Trump, coupled with a rise in deregulation, would lead to a boom in activity.

“That acceleration hasn’t materialized the way we had expected,” said Gabrielle Joseph, a managing director for Rede Partners, a private equity fundraising advisory firm.

Instead, the White House’s tariffs have helped worsen the challenges facing the PE sector, helping cool activity near the end of the first quarter. The report cited a Campbell Lutyens survey from April found that 33% of limited partners planned to slow their private market investments in the wake of Trump’s tariffs, while 8% were choosing an all-out pause.

Writing about the tariff situation last week, PYMNTS pointed to the pressures facing companies dependent on goods like Swiss watches and Brazilian coffee.

“Unless they pivot on sourcing or cut expenses elsewhere, somebody has to eat those costs, and 70% of tariff-related costs will be passed on to shoppers through higher prices, Goldman Sachs assumes,” that report said. “Right now, consumers face an overall average effective tariff rate of 18.3%, the highest since 1934, according to the Yale Budget Lab, equivalent to an average household income loss of $2,400.”

At the same time, small and medium sized businesses (SMBs) are showing more optimism than they did when the tariffs were first announced. While 68% of micro-SMBs said in February and March that they were confident in their survival over the next two years, that figure had climbed to 75% by June, PYMNTS Intelligence research has found.