The global private market fundraising landscape in 2024 saw a significant decline, with total capital raised dropping by 19.1% YoY to $1.14 trillion, as per PitchBook. The sharp downturn in 2024 wasn't just a cyclical setback, as it revealed fundamental flaws in the way capital flows into private assets. With liquidity bottlenecks and outdated allocation strategies limiting investors, private markets must urgently adapt or risk prolonged stagnation.
This slowdown was driven by constrained liquidity among limited partners (LPs), fewer distributions from existing funds, and continued macroeconomic uncertainty, reflecting deep structural challenges in private markets. Traditional LPs are already overallocated to private assets, leaving little room for additional commitments. The lack of meaningful distributions from prior funds has created a liquidity bottleneck, restricting investors’ ability to reinvest capital. While some argue that fundraising will bounce back once exit markets recover, the fundamental shift in LP allocation strategies suggests that fundraising conditions will likely remain difficult unless new pools of capital, such as retail investors or sovereign wealth funds, step in to fill the gap.
Figure 1: Private Capital Fundraising Throughout the Years (in $Billions)
Source: Pitchbook, data as of December 31, 2024
PE VC Struggles Amid Investor Caution
According to Pitchbook, private equity (PE) fundraising experienced an 18.6% drop in capital raised, reaching $487.7 billion. The number of PE funds closed fell by 48.3%, highlighting LPs’ caution in committing to new funds. Notably, larger, more established managers dominated fundraising, with megafunds (above $5 billion) attracting the majority of commitments. Mid-market and emerging managers faced significant hurdles as investors prioritized track records over new entrants. The extended time to close funds, which now averages 17 months, further illustrates how fundraising conditions have deteriorated.
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Venture capital (VC) suffered an even steeper decline, with capital raised plummeting by 25.8% to $160.6 billion and fund count falling by 40.8%, as per PitchBook. Liquidity constraints and the weakest IPO market since 2016 deterred investors, while dry powder accumulated in aging funds with fewer viable deployment opportunities. LPs concentrated capital in the most established VC firms, with nearly 80% of the US VC capital raised going to a select few top-tier managers. The sluggish exit environment suggests that VC fundraising will remain challenging until IPO markets recover.
Private Credit Shows Resilience as Secondaries Surge
In contrast to the struggles of PE and VC, private credit demonstrated relative resilience, raising $196.1 billion, as per PitchBook. While still down 19.6% from 2023, the retreat of traditional banks from corporate lending has created a significant opportunity for private credit funds to step in and provide financing. Higher interest rates have made private credit funds more attractive, as they offer better risk-adjusted returns than public markets. The largest private credit funds, such as Ares’ Senior Direct Lending Fund III and ICG’s Senior Debt Partners Fund 5, secured multibillion-dollar commitments, underscoring the sector’s growing appeal among LPs looking for yield in a higher-rate environment.
Figure 2: Surge in Secondaries Fundraising
Source: PitchBook, data as of December 31, 2024
Secondaries fundraising surged by 29.1% in 2024, reaching $101.6 billion, as per PitchBook. The increase was driven by a rising demand for liquidity solutions as LPs sought ways to rebalance portfolios amid constrained capital flows. Yet, while secondaries offer a solution, they also highlight the growing inefficiencies in private markets. If investors need to rely on secondary sales to generate liquidity, it suggests that the traditional private market model, where capital is locked up for a decade or more, needs to be rethought. GP-led continuation funds and traditional LP stake sales accounted for much of the activity, with major players like Lexington and Dover Street leading the charge. As long as LPs struggle with liquidity, secondaries will likely remain a strong fundraising channel in the coming years.
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First-Time Fund Managers Struggle as Investors Favor Established Firms
First-time fund managers faced some of the toughest conditions in recent memory, with only 416 new funds securing a close, which is less than half the count in 2022, as per PitchBook. Institutional LPs favored established firms over emerging managers, making it exceptionally difficult for new entrants to raise capital. Notably, the few first-time funds that did succeed were often backed by government or development agencies, highlighting the need for alternative sources of capital beyond traditional institutional investors. Many successful firms today were once first-time funds that took bold investment bets. If new managers are shut out, the industry risks becoming stagnant, with the same players controlling capital flows and dictating market trends.
The 2024 private market fundraising landscape highlights deep structural challenges that extend beyond macroeconomic cycles. Liquidity constraints, aging dry powder, and a difficult exit environment are reshaping how capital flows into private assets. While certain strategies like secondaries and private credit offer relative stability, the broader market remains under pressure. Without a material improvement in exits, particularly in PE and VC, the private market fundraising environment is unlikely to rebound meaningfully in 2025.
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