Private equity’s worst fundraising slump in a decade

Since the pandemic, private equity funds focused on Asia have struggled to raise money, as the industry sat on massive unsold assets and idle dry powder. 

Signs of growing confidence began to emerge late last year as exit values picked up and cash distribution for investors started flowing again, encouraging private equity to resume preparations to launch new funds after a multiyear lull in activity.

But now, that glimmer of optimism is contending with economic disruption from the war in the Middle East. The turmoil sweeping global markets has introduced a new layer of uncertainty, threatening to sap investor appetite that had just begun to recover, according to several industry practitioners. 

“What we are seeing now is not unlike the tariff situation early last year — causing people to pause, slow down, and just wait — to avoid exposure to any sudden shocks,” said Andrew Thompson, head of asset management and private equity for Asia Pacific at KPMG. “It’s just that uncertainty that causes things to slow down a bit,” he said in an interview with CNBC.

Against a backdrop of heightened uncertainty, Middle Eastern investment funds, a major source of capital for private equity globally, may also be taking a pause with outbound commitments at least for the near term, Thompson said. “Now is just not the time to go there for a fundraising visit. They simply have bigger issues to worry about now.” 

Asia-focused private equity firms saw new funds raised last year falling to the lowest level in over a decade, bagging just $58 billion, according to a Bain & Company report this week. That marked the fourth straight year of the downturn, as aging assets and underperforming funds overshadowed a modest recovery in increased liquidity from the rebounding exit values.  

Asia’s share of global fundraising last year also fell to just 5%, according to Bain. 

Yet 2025 ended with hopes of returning confidence, as net cash flows to fund investors, (the so-called limited partners, or LP), turned positive for the first time since 2021, offering partial relief to the liquidity pressures. 

Dealmaking rebounded last year with Asia-Pacific being the largest region by IPO proceeds and merger-and-acquisition activities surging on easing market conditions. 

The Iran war is in its fourth week, with little clarity on the prospects of a diplomatic off-ramp, prompting investors to scale back rate-cut bets and brace for a potential energy supply shock. 

“A prolonged war and a higher-for-longer rate environment are reintroducing caution,” said Edoardo Grigione, an advisor for alternative investment managers’ capital raising, prompting investors who are increasingly wary of geopolitical risks, to hold back on committing fresh capital to new funds.

Even as investors grow more selective about fund commitments, the region’s largest and more established managers continue to attract capital, signaling a widening gap with their underperforming peers.  

“The volume of capital targeting the region in 2026 is higher than a year ago, though it is concentrated at the top end of the market,” said PitchBook Private Capital Analysts Ansel Tan and Melanie Tng, in an email. “Smaller or less differentiated private equity fund managers face longer timelines and more difficult conditions,” they added.

Signaling some momentum in a difficult market, around 60 Asia Pacific-focused funds are still actively seeking to close funds worth more than $1 billion each. Together, they account for more than 10% of all capital being targeted globally, according to Bain.  

Early commitments to the global managers launching large, dedicated Asia vehicles also pointed to investors’ flight to quality, the report said.

The six biggest funds had disclosed approximately $25 billion in secured commitments by the end of 2025 — and if all close at their targets, they alone would surpass the $58 billion raised by every Asia-Pacific fund combined last year, according to Bain. 

To name a few, Sweden’s EQT secured $11.4 billion in commitments for its new Asia-focused buyout fund, with fundraising expected to conclude by year-end to hit a hard cap of $14.5 billion. 

Bain Capital, with a strong presence in Greater China and India, is close to finalizing its sixth pan-Asia private equity fund, totalling $10.5 billion, its largest Asia-focused fund to date. 

Blackstone has gathered more than $12 billion for its third private equity fund. KKR has also kicked off fundraising for its fifth Asia vehicle, targeting $15 billion. 

This pipeline, if closed at or near targets, could substantially exceed the total raised across Asia-focused PE funds in 2025, according to PitchBook. 

But much still depends on how long the conflict lasts. Some remain hopeful that the structural case for Asia private equity will reassert itself once the uncertainty clears.

“Overall, while fundraising may remain selective and disciplined, Asia’s structural growth fundamentals and an expanding retail capital base provide constructive support for 2026,” said Sam Padgett, private equity origination leader at Deloitte Asia Pacific.

In an email to CNBC, Padgett pointed to the region’s approximately $240 billion in dry powder — capital committed but not yet deployed — as evidence that the investment engine has not stalled. 

Higher interest rates and geopolitical uncertainty may weigh on valuations and LP allocations, he said, but they do not extinguish the fundamental obligation of general partners to find opportunities and put capital to work. 

Funds typically have five or more years to deploy committed capital, providing a buffer against short-term market disruption.

Benjamin Lohr, Asia funds partner at Herbert Smith Freehills Kramer, struck a similarly constructive tone. “We remain positive about Asian fundraising this year and see no slowdown in client activity right now,” he said by email, pointing to Hong Kong’s IPO resurgence as a source of capital likely to be recycled into private markets. 

Lohr said investor interest in technology and digital assets, secondaries — vehicles that allow private equity firms to extend their holding of pre-existing stakes — and private credit remained healthy, with a potential recovery in real estate beginning to take shape.

“People are waiting for more clear air,” said Thompson at KPMG. “Nobody really knows when that will come and the uncertainty will cause things to slow a bit.”