Private markets face 'reality check' as fundraising declines in 2025

Private market fundraising in Europe slowed to a decade low in 2025, after a record 2024, largely due to an absence of megafund fundraising, according to new data.

Morningstar’s European Asset Managers Q1 2026 Pulse reported that preliminary private equity fundraising data from PitchBook shows the lowest level of capital raised in Europe for a decade and warned that limited exits could delay future fundraising.

In 2025, the largest fund closed was below €5bn (£4.3bn), while in 2024, approximately 50 per cent of capital raised came from funds larger than €5bn.

The data also showed a continued decline in US private market fundraising in 2025, down 17 per cent on the amount raised in 2024.

According to Morningstar, Pitchbook highlighted continued consolidation trends and ongoing muted exit activity in the US, making it difficult for investors to commit more capital.

The decline in private market firms fundraising has also been attributed to liquidity constraints that limited cash distributions back to investors, while poor performance across parts of the private markets space has also raised the risk of further fundraising headwinds.

Morningstar said that, despite a slowdown in fundraising, investors will continue to expect better returns.

It expects conditions to improve in 2026, as liquidity and investment opportunities start to recover.

“2025 was a reality check for private markets. Returns on European private capital funds are tracking at half of their longer-term averages, largely due to persistent liquidity constraints that limited exits and cash distributions,” said Johann Scholtz, senior equity analyst at Morningstar.

“That pressure has closed the valuation gap with traditional asset managers and reset expectations.”

He added: “While challenges remain in the near term, we see valuations for private managers becoming more compelling into 2026.”