PErspectives: Private Equity Navigates Shifting Fundraising Dynamics

Welcome to Issue No. 8 of PErspectives—our periodic publication featuring news, trends and legal developments in the private equity industry. In this piece, we examine the driving forces behind a sharp decline in PE fundraisings in the first half of 2022 after a record-setting 2021. We also take a look at the macroeconomic and geopolitical headwinds facing the market.

The current fundraising landscape—with an influx of blue-chip managers raising record-sized funds and LPs quickly reaching their PE allocation caps—has created a significant bottleneck on LP resources. These dynamics are pushing managers and LPs to pivot their strategies and be more flexible to navigate market shifts and overcome new challenges in this environment.

With a view to how these developments are impacting PE stakeholders, we explore these and other critical questions:

• What are the implications of the denominator effect, particularly on LP capital and fundraising timetables?
• Why are investments in larger funds sponsored by more established PE managers on the rise, and how are smaller or emerging managers finding their niche in this market?
• How are sponsors and investors adjusting their strategies in response to current market volatility, and what has been the overall appetite for trying new approaches?
• Are sponsors and investors equipped to handle more protracted negotiations and bespoke documentation in this environment?
• What is the outlook for PE fundraising activity and new innovations in the near term?

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