The amount of time taken to raise funds has been increasing, and that dynamic is likely to persist in the short term.
In 2022, the average number of months to 'final close' hit 20 months for the first time since 2010 according to Preqin data. In some instances Limited Partners (LPs) were asking their General Partners (GPs) to push out some of their fundraising efforts because they were unable to keep up with the re-up requests from GPs raising subsequent funds.
LPs who have experienced the "denominator effect" - becoming overallocated to private
equity given public market indices - will be reluctant to make new commitments and the declining rate of exits, of course, exacerbates these dynamics.
For LPs re-committing capital, we foresee risk aversion influencing a trend towards fund managers with proven, and lengthy, track records. However, emerging managers specialising in sectors that align with LPs’ strategies and values will still attract investment.