Europe’s private equity fundraising slowdown has deepened, with 2025 being its weakest year in a decade and 2026 starting on an even slower note, according to Morningstar’s data.
Traditional asset managers have mostly recovered from a spell of investor caution earlier this year, but private equity firms continue to face difficult fundraising conditions as weak exit activity limits the capital returned to investors for reinvestment.
Geopolitical tensions and stagflation concerns triggered outflows from European active and passive funds in March, said Morningstar. However, inflows resumed in April and May.
Traditional asset managers could benefit if investors begin moving money out of money market funds into higher-fee investment products, supporting future revenue growth.
The lack of €5bn-plus megafund closings is a key drag on European fundraising, according to the data provider.
Lack of megafunds hits private markets fundraising: Morningstar
The report said subdued exit activity remains an obstacle for the industry, restricting capital distributions to investors and reducing their ability to commit fresh capital to new funds. This has created a cycle in which weaker exits limit capital returned to investors, reducing their ability to back new funds and increasing fundraising pressures.
European leveraged loan yields have climbed to 7.2%, up 62 basis points since the start of 2026, while wider credit spreads point to rising stress among borrowers as higher funding costs take effect.
However, Morningstar said listed private market managers now trade at price-to-earnings multiples close to those of traditional asset managers despite offering stronger long-term growth prospects and higher profitability.
