Episode #42: The Great Fundraising Hiatus: Is Private Equity Facing Its Toughest Market Yet?
Why Even Top-Tier Private Equity Managers Are Struggling to Raise Capital
Welcome to the Great Fundraising Freeze.
The private equity fundraising market has gone from overheated to ice-cold.
For years, private equity managers operated in a world of near-constant fundraising. LPs lined up to re-up. New GPs could secure commitments with the right pitch. The money kept flowing.
Now, the music has stopped.
A surge of capital deployment in 2021 and 2022, combined with public market corrections, has triggered a severe denominator effect. Investors are sitting on their hands, waiting for the dust to settle. Even well-established managers—firms that once raised funds with ease—are struggling to get LPs to commit.
What does it mean for the industry? And what should GPs do next?
In this episode of Fund Shack, Ross Butler speaks with Warren Hibbert, founder of Asante Capital Group, one of the top placement agents in private markets. Hibbert has a front-row seat to the capital drought and offers a rare, unfiltered look at what’s happening inside LP allocation meetings.
Watch the full episode….
Clip: FOMO created the crunch….
The Boom Before the Bust: How We Got Here
If you want to understand today’s brutal fundraising climate, you need to rewind a few years.
The Post-COVID Frenzy – After a shaky 2020, private equity went into overdrive. Markets rebounded, tech stocks exploded in value, and institutional investors doubled down on allocations.
FOMO-Fueled Fundraising – Mega-funds and tech-heavy GPs were delivering returns of 4x to 9x net. Investors, terrified of missing out, started pre-allocating capital years in advance.
A Broken Cadence – Instead of the usual two- to three-year fundraising cycle, some funds were coming back every 9 to 14 months, and LPs were saying yes.
Then came the reckoning.
The Denominator Effect Hit Hard – When public markets corrected, LP portfolios became overweight on private assets, slamming the brakes on new commitments.
LPs Ran Out of Money – Many had overcommitted in 2021 and 2022, borrowing against future allocations. By late 2022, they were tapped out for 2023 and even 2024.
Fundraising Came to a Standstill – First-time funds were suddenly uninvestable. Even established names found themselves waiting in line.
Who’s Still Raising? The Market’s Massive Bifurcation
Not every fund is suffering equally
The Elite Few – The top 10 private equity firms now control 30% of all capital raised. The top 10% take over 80%. If you’re not one of them, it’s a struggle.
Tech-Heavy GPs Still Dominate – Despite the correction, firms with deep tech expertise are still getting investor attention. The belief? Tech disruption is far from over.
The Mid-Market Squeeze – Many mid-sized, previously in-demand fund managers are stuck in extended roadshows, facing LPs who no longer have the capacity to re-up.
First-Time Funds Are DOA – In this climate, unless you have an exceptional track record or a high-profile spinout team, first-time funds are all but uninvestable.
Private equity has become a winner-takes-all game, and fundraising success now requires more than just a good track record.
The New Reality: What GPs Must Do Differently in 2024
Fundraising is Perpetual – The days of pausing between fund cycles are over. LPs expect to see consistent engagement, not just a pitch when you need capital.
LP Relationships Matter More Than Ever – Fundraising isn’t just about your numbers,it’s about your team, your strategy, and your ability to communicate a compelling long-term vision.
The "2x Net" Benchmark is Real – If your fund isn’t delivering north of a 2x net return, you’re fighting uphill. LPs are comparing you to a new benchmark set by tech-heavy firms in 2021.
Tech-Savviness is a Competitive Advantage – Even if you’re not a tech investor, embracing AI, automation, and digital transformation in your portfolio companies shows LPs that you’re evolving with the market.
Your Management Company is a Business, Too – The best firms apply the same operational excellence to themselves that they do to their portfolio companies. The most successful GPs today? They have dedicated fundraising teams, whether in-house or external.
Don't Launch Prematurely – The biggest mistake GPs make? Going to market too soon. Warren’s advice: Know where at least 50% of your capital is coming from before you start fundraising.
What’s Next? The 2024-2025 Fundraising Outlook
So, when does this freeze thaw?
Q4 2023: LPs Are Still on the Sidelines – Fundraising is improving, but only slightly. Investors are still cautious and selective, and many are focused on rebalancing existing allocations.
2024: A Tough but Stabilizing Year – Warren predicts that 2024 fundraising levels will resemble 2022, with some capital freeing up but nowhere near pre-2021 levels.
2025: A Return to Steady Fundraising? – If economic conditions stabilize and LPs regain liquidity, we could see a more normalized fundraising environment by 2025.
The big question: Will fund managers evolve fast enough to adapt to this new, more selective private capital landscape?
Final Takeaways for GPs in 2024 and beyond
Fundraising is now a 24/7 operation – You can’t just "switch it on" every few years.
Tech expertise matters, even if you’re not a tech fund – Investors want to see innovation in value creation.
LPs are looking at team cohesion and long-term stability – A strong, aligned team is just as important as past performance.
Know your capital sources before launching a fundraise – Aim for at least 50% certainty before you hit the road.
If you miss your fundraising target, rethink your model…. fast – GPs who assume "next time will be easier" are in trouble.
The private markets fundraising game has changed forever. The firms that embrace this reality, sharpen their strategies, and evolve their fundraising approach will thrive in the new era.
The ones that don’t? They’ll be left behind.
This episode was first released on October 11, 2023.
