Key Takeaways
- • New State Capital Partners, managing approximately $2bn, has reportedly lost around a third of its employees over the past year, including two of its three founding partners, according to a report by The Wall Street Journal.
- • Private equity firms raised approximately $222bn through September 2026, down from $330bn during 2025, as institutional investors prioritise distributions and established manager relationships.
- • Smaller managers with less than $15bn under management face particular strain because they often lack the diversified revenue streams and capital resources of larger alternative asset managers such as Blackstone and Apollo.
- • Slower exits are reducing carried interest expectations and retention prospects, forcing firms to hold existing investments for longer.
- • New State is expanding into independent sponsorship transactions, while Aterian Investment Partners has opted not to raise a new fund.
Summary
Smaller private equity managers are under mounting financial and operational pressure as higher borrowing costs, weaker portfolio performance and a prolonged slowdown in exits erode prospects for investment returns and employee payouts, according to a report by The Wall Street Journal.
New State Capital Partners, which manages approximately $2bn, has reportedly seen around a third of its employees depart over the past year, including two of its three founding partners. Staff face uncertainty over potential carried interest payments from the firm's second fund, which began investing in 2018. Underperformance among portfolio companies and rising financing costs have complicated prospects for profitable exits.
The report highlights particular challenges for private equity firms managing less than $15bn. Such firms often lack the diversified revenue streams and capital resources available to larger alternative asset managers such as Blackstone and Apollo, leaving them more exposed to the current environment.
Fundraising conditions have also deteriorated. Private equity firms raised approximately $222bn through September 2026, compared with $330bn during 2025, as institutional investors continue to prioritise distributions and established manager relationships. The slowdown in exits is also affecting recruitment and retention across the sector, with delayed realisations reducing carried interest expectations and increasing pressure on firms to manage existing investments for longer.
Some firms are adjusting their strategies in response. New State is expanding into independent sponsorship transactions, while Aterian Investment Partners has opted against raising a new fund.
New State Capital Partners, which manages approximately $2bn, has reportedly seen around a third of its employees depart over the past year, including two of its three founding partners. Staff face uncertainty over potential carried interest payments from the firm's second fund, which began investing in 2018. Underperformance among portfolio companies and rising financing costs have complicated prospects for profitable exits.
The report highlights particular challenges for private equity firms managing less than $15bn. Such firms often lack the diversified revenue streams and capital resources available to larger alternative asset managers such as Blackstone and Apollo, leaving them more exposed to the current environment.
Fundraising conditions have also deteriorated. Private equity firms raised approximately $222bn through September 2026, compared with $330bn during 2025, as institutional investors continue to prioritise distributions and established manager relationships. The slowdown in exits is also affecting recruitment and retention across the sector, with delayed realisations reducing carried interest expectations and increasing pressure on firms to manage existing investments for longer.
Some firms are adjusting their strategies in response. New State is expanding into independent sponsorship transactions, while Aterian Investment Partners has opted against raising a new fund.
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