Private market fundraising in Europe fell sharply in 2025, as the absence of megafund launches dragged capital-raising to its lowest level in a decade, according to data from Morningstar.
The recent underperformance of private market firms has also narrowed the valuation gap with traditional asset managers, the report said.
Preliminary private equity fundraising data from Pitchbook, a Morningstar company, showed that in 2025, the largest fund closed was below €5 billion, compared with 2024, when around half of total capital raised came from funds larger than €5 billion.
Fundraising conditions also remained challenging in the US, where private equity capital-raising fell 17% year on year in 2025. Pitchbook pointed to continued consolidation and muted exit activity, making it harder for investors to commit fresh capital.
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The slowdown was attributed to liquidity constraints that limited cash distributions to investors, while weaker performance across parts of private markets has increased the risk of fundraising headwinds. However, the report said conditions are expected to improve in 2026 as liquidity and investment opportunities begin to recover.
Sentiment towards active management is showing signs of improvement, the data showed, even as passive strategies continue to dominate fund flows. Morningstar said renewed interest in active strategies suggests investors are becoming more selective, providing a more supportive backdrop for traditional asset managers.
“2025 was a reality check for private markets. Returns on European private capital funds are tracking at half of their longer-term averages, largely due to persistent liquidity constraints that limited exits and cash distributions. That pressure has closed the valuation gap with traditional asset managers and reset expectations. While challenges remain in the near term, we see valuations for private managers becoming more compelling into 2026,” said Johann Scholtz, senior equity analyst at Morningstar.
