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.