Private equity fundraising rebounds as exits lag

Private equity fundraising has rebounded after years of stagnation, but the industry still faces a core challenge: returning capital to investors. The Private Equity Trends Report 2026 shows that managers secured roughly $312 billion in capital commitments during the first half of 2026, exceeding half of last year’s full-year total of $490 billion. This marks the strongest first-half performance in history, reversing a period of weak fundraising and stalled exits.

Fundraising Rebound Meets Slower Deal Pace

The recovery is uneven across the sector. While deal activity is rising in targeted areas, holding periods have extended well beyond historical averages. Limited partners now prioritize managers capable of delivering actual cash distributions over unrealized gains. In the second quarter of 2026, the median time to close a North American private equity transaction reached 274 days, up from 200 to 220 days between 2018 and 2021. This slowdown stems from stricter due diligence, financing difficulties, and increased regulatory oversight across deal structures.

Activity has picked up in specific subsectors. By mid-2026, first-half volumes already surpassed second-half 2025 levels in 30 subindustries, with 12 of those seeing at least double the number of transactions. The fastest growth occurred in industrials, including commercial aircraft, HVAC systems, and freight forwarding. Defense-related investments, infrastructure connections, and logistics have gained particular attention as geopolitical tensions reshape investment priorities.

Lengthening Holding Periods Alarm Investors

The most pressing concern for institutional investors is the prolonged holding periods. Median holding times now exceed five years across all major sectors, up from 4.0 to 4.5 years in 2018 and 2019. Business services and technology now have the longest median periods at 5.3 years, despite their historical turnover speed. Consumer portfolios have seen slight improvement—from 6.1 years in 2023 to 5.2 years—but industrials remain the only sector below five years, at 4.9 years. About one-third of industrial goods portfolio companies have been held for at least seven years, indicating a significant backlog of mature assets awaiting exits.

Fund-level data reveals a mixed performance. Between late 2024 and late 2025, the ratio of residual value to paid-in capital declined for most fund groups, while distributions to paid-in capital rose. This suggests more value is being realized, but recent vintages still rely heavily on unrealized gains. The 2014 fund vintage experienced an 8 percentage point drop in residual value share, while newer funds continue to depend on paper valuations.

The fundraising rebound favors top-tier managers

The recovery in fundraising is concentrated among the largest firms. In the first half of 2026, the top 20 funds accounted for $171 billion, more than half of the $312 billion raised. Vehicles from KKR, EQT, Clearlake, and Blackstone led the way, reflecting limited partners’ preference for global multi-asset managers with strong track records.

Secondaries Surge as Liquidity Engine

Secondaries have become essential for liquidity. The asset class surpassed $50 billion in fundraising during the first half of 2026, making up over 15% of total private equity commitments. Two funds—Coller International Partners IX and Partners Group Secondary VIII—raised $17 billion and $9 billion, respectively, accounting for over half of secondaries fundraising. General partner-led transactions continue driving volume, as sponsors use continuation funds to unlock value without forced exits.

Limited partners are refining their relationships with high-performing managers. In the first half of 2026, CalPERS led all allocators with 62 mandates and $13.6 billion in disclosed commitments, primarily directed to established partners like Bain Capital and Arlington Capital. Meanwhile, Texas Teachers allocated 40% of its private equity spending to new managers, focusing on small and mid-market buyouts. Managing director Neil Randall observed that firms with less than $3 billion in assets offer greater return potential.

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Co-investments are now a standard strategy. CalSTRS plans to co-invest one-third of its 2026 pacing target, aligning with broader trends among large allocators.

Balancing New Capital Deployment and Liquidity

The industry’s central challenge in 2026 remains deploying new capital while generating liquidity from existing portfolios. Fundraising is improving, deal activity is accelerating in select sectors, and secondaries are providing more exit options. However, the gap between managers delivering real cash returns and those relying on unrealized valuations is shaping where limited partners allocate capital.

The growing emphasis on secondaries is transforming how managers and investors approach liquidity. Transaction volumes in the space hit $121 billion in the first half of 2026, the highest first-half total ever. Analysts project full-year volumes could reach between $250 billion and $270 billion, driven by institutional demand and sponsor-led strategies. General partner-led transactions—where managers use continuation funds to extend holding periods—accounted for about half of secondaries volume in the first half of 2026. This trend reflects the industry’s recognition that traditional exit routes remain limited, pushing sponsors to monetize stakes incrementally.

Behind the surge in secondaries lies a structural imbalance: newer funds struggle to deploy capital, while older portfolios hold unrealized gains. The 2014 fund vintage, now in its final years, saw an 8 percentage point decline in residual value share between late 2024 and late 2025, indicating investors are finally recouping some of their initial commitments. However, newer vintages—particularly those from 2020 onward, still depend heavily on paper valuations.

The disparity is most pronounced in technology and business services, where holding periods now average 5.3 years, up from 4.0 to 4.5 years before the pandemic. Even industrials, the only sector with a median holding period below five years (4.9 years), has a third of its portfolio companies held for seven years or more, creating a prolonged backlog of assets that could sustain deal flow for years.

For limited partners, the divide between managers with liquidity and those without is influencing investment choices. CalPERS’s focus on Bain Capital and Arlington Capital—both known for consistent distributions, shows how allocators prioritize cash flow over growth potential. Meanwhile, Texas Teachers’ shift toward small and mid-market buyouts reflects a bet that niche managers, with assets under $3 billion, may deliver stronger returns by avoiding larger funds’ congestion. This strategy aligns with Neil Randall’s observation that these firms offer greater return opportunities, though it also highlights the growing specialization within private equity.

Francisco Partners’ dominance in mandate count—45 deals and $3.3 billion in disclosed value through mid-2026, stems from its dual fund structure, offering both traditional buyout capital and the Agility series, which targets co-investments and secondary transactions. The firm’s approach mirrors broader trends among top managers, who are bundling multiple strategies to attract capital in a market where limited partners demand flexibility. HgCapital and EQT Partners followed with 26 and 22 mandates, respectively, though their focus remains on core buyout funds rather than secondary or co-investment vehicles. This contrast shows how even elite managers are adapting to the new reality: liquidity is now a primary allocation criterion.