Weak cash distributions to investors in recent years are making it harder for private equity firms to raise new money, an issue dominating discussions among dealmakers gathered in Berlin this week for the industry’s largest annual conference.
The industry is in the midst of a prolonged “liquidity crunch,” with a growing number of companies stuck in portfolios as exits remain subdued, consultancy Bain & Co said in a report. Private equity firms now hold assets for around seven years on average, beyond the traditional three to five years, Bain said, while the backlog of unsold companies has climbed to about 33,000.
That matters because limited partners like pension funds, sovereign wealth funds and endowments rely on cash distributions to recycle capital. With less money coming back, investors are slowing new commitments.
“LPs want to see money coming back in order to reinvest,” said Nicolas Brugere, a partner at Swedish buyout firm EQT, adding that shifts in the market were favouring larger, more established managers as investors consolidate relationships.
Private capital fundraising reached $337 billion across 956 funds so far this year, according to LSEG data, compared with $747 billion raised across 1,970 funds in all of 2025.
“The industry is concentrating,” Brugere said. “Investors want fewer relationships and they value scale.”
DEALMAKING STALLING
A combination of falling software valuations, uncertainty surrounding the U.S.-Israeli war on Iran, and stress in private credit markets has cooled dealmaking, fundraising and exits, Bain & Company said.
Global buyout activity reached $299 billion year-to-date, compared with $327 billion over the same period in 2025, while exit volumes stood at $321 billion, versus $346 billion a year earlier, Dealogic data showed.
Europe, however, has proved resilient, with exit values rising to $129 billion so far this year, more than double the $52 billion recorded over the same stretch in 2025. Bankers and investors say pent-up demand for deals and an improving financing environment have helped drive a rebound.
PRESSURE SPREADS TO PRIVATE CREDIT
The strain is spilling over into private debt, a market that has grown rapidly alongside private equity. Funds that drew investors on promises of periodic liquidity are being tested as redemption requests rise.
The pattern echoes earlier stress in real estate funds, where withdrawals were queued for months or years when managers could not sell assets quickly enough.
A similar gap between redemption requests and payouts could emerge in private credit, a sales manager at a major securities services provider said.
Matt Theodorakis, a partner at Ares Management, one of the world’s largest private credit managers, pointed to a slowdown in inflows and a retrenchment of capital.
“What we see in our investment committee, which is over the last three to six months, is that money subsided,” he said on a panel on Tuesday, highlighting how the slowdown in distributions is rippling across markets, from buyouts to credit.
The pressure appears to be more acute in the United States, while in Europe demand for private credit, particularly from mid-sized companies, remains strong, according to a senior manager at a large European private equity firm.
(Reporting by Mathieu Rosemain)
