Key Takeaways
- • European private equity fundraising collapsed 40% in 2025 to a decade low, driven entirely by the absence of megafund closings (funds over €5 billion), with the largest fund closed in 2025 reaching only €4.6 billion versus half of 2024's capital coming from €5 billion-plus funds.
- • Megafund drought represents a structural shift in the market: in 2024, approximately 50% of total capital raised came from funds exceeding €5 billion; in 2025, no megafunds closed above that threshold, fundamentally altering the composition of capital flows.
- • The fundraising contraction reflects a "reality check for private markets" as liquidity constraints limited exits and cash distributions, narrowing the valuation gap between private equity managers and traditional asset managers and forcing investors to reset expectations.
- • US private equity fundraising also declined 17% year-over-year in 2025, indicating the slowdown is not isolated to Europe but part of a broader capital-raising challenge across major developed markets.
- • Despite the challenging fundraising environment, Morningstar forecasts private equity valuations may become "more compelling into 2026," with private market valuations expected to stabilize and attract renewed institutional interest.
Summary
European private equity faces a severe fundraising crisis driven primarily by the complete absence of megafund closings in 2025. According to Morningstar and PitchBook data, private equity fundraising in Europe plummeted 40% year-over-year, marking a return to decade-low levels after reaching record highs in 2024. The decline is attributable almost entirely to the failure of large fund closings, a structural break from historical patterns. In 2024, approximately half of all capital raised originated from funds exceeding €5 billion in size; by contrast, 2025 saw no megafunds close above this threshold, with the largest fund closing at only €4.6 billion.
Johann Scholtz, senior equity analyst at Morningstar, characterized 2025 as "a reality check for private markets," highlighting how the fundraising drought reflects deeper operational constraints within the private equity ecosystem. Liquidity challenges have constrained exits and limited cash distributions to returning investors, creating a cascading effect on fundraising momentum. As distributions slowed, the valuation premium that private markets previously enjoyed relative to traditional asset managers has contracted significantly, narrowing the historical gap and forcing limited partners to recalibrate their return expectations and capital allocation strategies.
The European slowdown is not an isolated phenomenon. US private equity fundraising also contracted 17% in 2025 compared to 2024, indicating that capital-raising headwinds span both major developed markets. Additionally, European venture capital is experiencing its worst fundraising year in a decade, as megafund activity diminishes and capital concentrates among smaller vehicles.
Despite the near-term pressure, market participants anticipate gradual stabilization ahead. Morningstar forecasts that private equity valuations may become "more compelling into 2026," potentially rekindling institutional investor appetite. The analyst firm identified Partners Group as a leading private European asset manager stock pick and Amundi as the top pick for traditional European asset managers, signaling differentiated performance among managers navigating the transition. Active strategies also showed modest recovery in 2025, with renewed institutional selectivity suggesting a potential inflection point as investors calibrate exposure to alternative assets.
Johann Scholtz, senior equity analyst at Morningstar, characterized 2025 as "a reality check for private markets," highlighting how the fundraising drought reflects deeper operational constraints within the private equity ecosystem. Liquidity challenges have constrained exits and limited cash distributions to returning investors, creating a cascading effect on fundraising momentum. As distributions slowed, the valuation premium that private markets previously enjoyed relative to traditional asset managers has contracted significantly, narrowing the historical gap and forcing limited partners to recalibrate their return expectations and capital allocation strategies.
The European slowdown is not an isolated phenomenon. US private equity fundraising also contracted 17% in 2025 compared to 2024, indicating that capital-raising headwinds span both major developed markets. Additionally, European venture capital is experiencing its worst fundraising year in a decade, as megafund activity diminishes and capital concentrates among smaller vehicles.
Despite the near-term pressure, market participants anticipate gradual stabilization ahead. Morningstar forecasts that private equity valuations may become "more compelling into 2026," potentially rekindling institutional investor appetite. The analyst firm identified Partners Group as a leading private European asset manager stock pick and Amundi as the top pick for traditional European asset managers, signaling differentiated performance among managers navigating the transition. Active strategies also showed modest recovery in 2025, with renewed institutional selectivity suggesting a potential inflection point as investors calibrate exposure to alternative assets.
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