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The top-10 private equity funds took their biggest share of US fundraising in more than a decade last year, as institutional investors curbed commitments and returned to larger managers amid poor distributions.
These funds account for 46 percent of all US private equity capital raised until September 30 – the highest share since 2014 – from 34.5 percent in 2024, according to PitchBook data.
The concentration was accompanied by a 17 percent increase in fundraising among the top-10 funds in North America until December 17 compared to 2024, while fundraising in the rest of the market fell 12 percent during the same period, according to Preqin, another financial information provider.
Private equity groups, including Advent International, KKR, Thoma Bravo, Blackstone and Bain Capital, each raised more than $10bn last year for new buyout funds, according to public filings.
The bifurcation highlights how a broader slowdown in private equity is changing investor behavior. Institutional investors, led by pension funds and sovereign wealth funds, focus their PE allocations on large managers with strong performance.
Hugh MacArthur, global private equity practice chair at Bain, said: “Investors feel that they are the only ones able to commit to funds where they need to put money to work and those tend to be larger funds that represent a safe pair of hands.”
The growing dominance of large PE funds in capital raising comes as the industry struggles to return cash to investors amid a slowdown in initial public offerings and deal-making. The distribution rate of buyout funds worldwide fell to 11 percent in the second quarter of last year, down from 28 percent in 2021, according to MSCI.
The underperformance prompted many asset managers to slow or lower their allocations to private equity.
The chief investment officer of a public pension plan with more than $20bn in assets says the fund has reduced its exposure to fewer private equity managers after struggling to “recoup money” from earlier investments.
“We need some run-off from our existing portfolio,” he said.
Bain’s MacArthur said the lack of diversity and resources put many PE funds at a further disadvantage in raising capital.
“If you have a good relationship with investors and you’ve been around for a long time, but I don’t see anything special about your ability to generate excess returns, those are the people who are in the most trouble,” he said.
In contrast, leading private equity firms have had little difficulty raising capital, even as the industry grapples with weak distribution. Scott Nuttall, co-chief executive of KKR, said the group had “a record fundraising year”, adding that it had raised large private equity funds amid “relatively low demand globally”.
Asset managers, especially large ones, traditionally work with private equity firms that are able to accommodate large investment commitments.
Bruce MacDonald, chief investment officer of VCU Investment Management, said: “If you have to write a $1bn check, there are only a few fund groups that can handle that size.”
The trend intensified as many institutional investors began cutting ties with underperforming private equity managers and concentrating their resources on well-established groups that they believed would be better positioned to weather the downturn.
“We believe that our private equity managers have staying power and will not lose, due to their diverse asset bases and global footprints,” said an executive at the second pension plan that invested in several PE funds last year. “If there are problems, they can be solved.”
The executive added that many PE funds tend to invest in more mature companies that will be “more resilient in a challenging world”.
Yet some asset managers have warned that the shift towards large private equity groups could come at the expense of returns, as the sheer size of capital makes it harder to generate outperformance.
MacDonald said that while VCU does not invest heavily in private equity, it would favor small and mid-cap managers if it did, arguing that returns in that segment are more dispersed and that the strongest funds out there can outperform the best large-cap managers.
“There are a lot of bad funds in the lower middle market,” he said, referring to smaller PE managers. “But if you find a good fund, your upside will be much bigger.”