Private equity’s worst fundraising slump in a decade
Blackstone Group’s logo is on display during the opening of the company’s new office in Singapore.
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Since the pandemic, private equity funds focused on Asia have struggled to raise money as the sector is preoccupied with large unsold assets and idle powder.
Signs of improving confidence began to emerge late last year, as exit values recovered and cash distributions to investors began to flow again; This has encouraged private capital to restart preparations to launch new funds after a multi-year lull in activity.
But now, that glimmer of optimism is being challenged by the economic disruption resulting from war in the Middle East. According to some industry practitioners, the turmoil sweeping global markets has created a new layer of uncertainty, threatening investor appetite that is just beginning to recover.
“What we are seeing now is not unlike the tariff situation at the beginning of last year, which caused people to pause, slow down and just wait to avoid exposure to sudden shocks,” said Andrew Thompson, head of asset management and private equity at KPMG Asia Pacific. “It’s exactly that uncertainty that’s causing things to slow down a little bit,” he said in an interview with CNBC.
Thompson said that, against the backdrop of increasing uncertainty, Middle East investment funds, which are an important source of capital for global private equity, may also pause their foreign commitments, at least in the near term. “Now is not the time to go there for a fundraising visit. They have bigger problems to worry about right now.”
Asia-focused private equity firms saw new funds raised last year fall to the lowest level in more than a decade, raising just $58 billion. Bain & Company report This week. This marked the fourth consecutive year of decline as aging assets and underperforming funds overshadowed a modest recovery in increased liquidity from recovering exit values.
Asia’s share of global fundraising last year also fell to just 5%, according to Bain.
But 2025 ended with hopes for confidence to return; Net cash flows providing funds to investors (so-called limited partners, or LPs) turned positive for the first time since 2021, providing partial relief to liquidity pressures.
Deals picked up last year, with Asia-Pacific being the largest region due to increased IPO proceeds and merger and acquisition activity as market conditions improved.
With the Iran war now in its fourth week and little clarity on the possibility of a diplomatic exit, investors are reducing their bets on a rate cut and bracing for a potential energy supply shock.
“A protracted war and a higher interest rate environment for a longer period of time is putting caution back on the agenda,” said Edoardo Grigione, a capital-raising adviser to alternative investment managers, encouraging investors increasingly wary of geopolitical risks to hold back on allocating fresh capital to new funds.
flight to quality
Even as investors become more selective about their fund commitments, the region’s largest and most established managers continue to withdraw capital, signaling that the gap with underperforming peers is widening.
“The volume of capital targeting the region in 2026 is higher than a year ago, although it is concentrated at the top end of the market,” PitchBook Private Equity Analysts Ansel Tan and Melanie Tng said in an email. “Smaller or less differentiated private equity fund managers “We face longer timelines and more difficult conditions,” they added.
Signaling some momentum in a challenging market, nearly 60 Asia Pacific-focused funds are still actively seeking to close funds worth more than $1 billion each. Together, these account for more than 10% of all targeted capital globally, according to Bain.
Early commitments from global executives to launch large, dedicated Asian vehicles also signaled investors’ flight to quality, the report said.
The six largest funds have announced nearly $25 billion in secured commitments by the end of 2025 — and if they all come close to their targets, they could top the $58 billion each Asia-Pacific fund alone raised last year, according to Bain.
Sweden, to name a few EQT raised $11.4 billion While it has made commitments for the new Asia-focused buyout fund, the fundraising is expected to be completed by the end of the year and reach a hard cap of $14.5 billion.
Bain Capital, which has a strong presence in greater China and India, is nearing completion of its sixth pan-Asian private equity fund. total of 10.5 billion dollarsits largest Asia-focused fund to date.
Karataş to have Raised more than $12 billion for the third private equity fund. KKR It has also started fundraising for its fifth Asian vehicle. We target 15 billion dollars.
If this pipeline closes at or near targets, it could significantly exceed the total raised in Asia-focused PE funds in 2025, according to PitchBook.
glimmer of optimism
But much still depends on how long the conflict lasts. Some remain hopeful that the structural situation for Asian private capital will re-emerge once the uncertainty subsides.
“Overall, while fundraising remains selective and disciplined, Asia’s structural growth fundamentals and expanding retail capital base provide constructive support for 2026,” said Sam Padgett, private capital origination leader at Deloitte Asia Pacific.
In an email to CNBC, Padgett pointed to the region’s roughly $240 billion in dry powder (capital has been committed but not yet deployed) as evidence that the investment engine hasn’t stalled.
High interest rates and geopolitical uncertainty can put pressure on valuations and LP allocations, but they don’t take away general partners’ fundamental obligations to find opportunities and put capital to work, he said.
Funds typically have five or more years to deploy committed capital, providing a buffer against short-term market disruptions.
Benjamin Lohr, Asia fund partner at Herbert Smith Freehills Kramer, struck a similarly constructive tone. “We remain positive on fundraising in Asia this year and do not currently see a slowdown in client activity,” he said. He pointed to Hong Kong’s IPO resurgence as a source of capital likely to be leveraged into private markets, he said via email.
Lohr said investor interest in technology and digital assets, secondary assets (vehicles that allow private equity firms to expand their pre-existing stakes) remains healthy, and a potential recovery in real estate is starting to take shape.
“People expect cleaner air,” KPMG’s Thompson said. “No one really knows when that will come, and the uncertainty will cause things to slow down a bit.”
