Fundraising Tanked for Top Private Equity Firms During the First Half of 2023

Finding it harder to monetize their holdings in a tough market, managers are turning to “perpetual capital” from insurers and retail investors.


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As private equity returns trail the overall market, and funds are unable to sell off their investments, the top firms are finding it more difficult to raise money — particularly from institutional investors.

Private equity fundraising was down 57.4 percent during the first half of 2023 at the top publicly traded firms, according to a new report from PitchBook. That said, it noted that these firms raised more than $106 billion in the second quarter, a gain of 6.4 percent over the first quarter and ending three consecutive quarterly declines.

The somewhat sobering trend is occurring as performance remains sluggish at these firms, a hangover from 2022’s downturn. During the second quarter, the top publicly traded U.S. private equity managers posted a median gross return of only 3.1 percent for their portfolios, according to PitchBook. The firms analyzed include Apollo Capital Management, Ares, Blackstone, Blue Owl, Carlyle, KKR, and TPG.

Meanwhile, the S&P 500 gained 8.7 percent during the same quarter. It was the third consecutive quarter of low single-digit returns for the private equity firms, according to PitchBook.

Private equity’s use of leverage often has been cited as a reason the strategy has posted higher returns than the broader market. But during the 12 months ending June 30, that did not help. Over that period of time, these same managers posted a median gross return of 9 percent—almost a third less than the 13 percent total return for the S&P 500.

The limp returns occurred as PE firms were unable to sell off their holdings. Realizations “remain stunted amid continued market challenges,” PitchBook reported, noting that over the past year, “monetization opportunities diminished.”


That, in turn, hurt the firms’ ability to raise more money. The cash from realizations can help managers make distributions to investors, who often use that cash to commit to a firm’s next fund.

“They have to return capital to get it back,” explains one former private equity manager.

During the second quarter, fundraising at Blackstone, the largest of the firms, was down by more than half from the same period last year, as it was for TPG and Carlyle. Three flagship funds — Blackstone IX, Carlyle VIII, and TPG IX — raised only about two-thirds of their targets after 14 months to 28 months in the market, PitchBook noted. The three collectively raised $1.8 billion for “another lackluster quarter of megafund activity,” PitchBook said.

(The bulk of the new money has gone into private credit over the past 12 months, and now accounts for 46.2 percent of total assets under management.)

With the difficulty of selling their holdings, private equity firms are turning to what’s called perpetual capital. Such vehicles have an indefinite lifespan, which “alleviates the need to sell assets within a prescribed time frame, and they allow for a more accelerated realization of performance fees and more recurring revenue,” according to PitchBook.

Apollo has led the way in raising perpetual capital, with 56.9 percent of its assets under management in open-ended capital, largely through its insurance operation, Athene, where long-term liabilities “match up with the perpetual capital structure,” PitchBook explained. It noted that $18.7 billion of Apollo’s total inflows can be sourced to Athene.

Apollo’s fundraising has increased over the past 12 months, with $20 billion coming from its latest buyout flagship, PitchBook said. However, that fund still closed $5 billion shy of its initial $25 billion target.

Although alternative managers are transitioning to perpetual fundraising “as fast as the market will allow,” PitchBook said, “institutional investors are likely to resist this change and stick with finite term funds.”

As a result, private equity firms are turning to both insurance and private wealth, or retail money. In Blackstone’s case, perpetual capital has grown at a compound annual growth rate of 43.1 percent for the five years ending June 30, compared with a 17.9 percent growth in total assets under management.

“As institutional fundraising has become more crowded, retail has come to represent a greenfield opportunity for many firms. Blackstone has led the pack with a total of $240 billion in private wealth assets under management, approximately half in perpetual vehicles,” according to PitchBook.

The much smaller Blue Owl, however, boasts the highest share of its assets under management in perpetual capital — 79.2 percent, or $118.6 billion total. Approximately half of that can be traced to offerings for individual investors.

PitchBook said that managers expect the sluggish fundraising environment to continue for the rest of this year.