If you want to understand the market, follow the money.

PitchBook’s Q3 report confirms what’s echoing across Wall Street: it’s a brutal time to be fundraising.

Total capital raised across private markets is down nearly 25% in 2025.

For private equity, it’s the worst fundraising environment in a decade.

But not every strategy is shrinking.

Co-investment vehicles have grown as LPs push for lower fees, while secondaries are surging as a temporary liquidity solution.

The fundraising drought has been caused by a sharp slowdown in dealmaking since the Fed started raising rates in 2022.

Higher rates, combined with an uncertain economic environment, have throttled M&A and IPO activity. In turn, private equity is struggling to sell portfolio companies.

Private equity exit value fell almost 40% from 2021 to 2024, and 2025 is shaping up to be even lower.

As portfolio companies pile up, there is less cash for distributions to LPs. These investors have responded by slashing commitments to new funds.

This same dynamic is weighing on venture capital, real estate and infrastructure.

When exits stall, distributions slow. When distributions slow, fundraising takes a big hit.

But not all investors are suffering.

The biggest winner from the industry slowdown has been secondaries.

Secondary transactions, the sale of existing fund stakes, are one of the few ways LPs can exit their investments before the end of a fund’s life.

These deals have flourished as LPs scramble for liquidity. Sponsors are also using secondaries for continuation vehicles to replace traditional exits.

These dynamics drove record volume in 2024, which will likely be broken in 2025.

LPs want liquidity, sponsors want runway, and secondary buyers want discounts. All three converge in the rapidly growing secondaries market.

Expect secondaries to keep growing in the near term as distributions remain depressed.

A private market rebound depends on one thing: more deal activity.

There have been positive signs as 2025 draws to a close: M&A transaction value is climbing. Several major IPOs are on the horizon (SpaceX, OpenAI, Anthropic). The Fed is lowering rates.

But headwinds also remain: a weakening economy, a slowing labor market, and sticky inflation. Bankruptcies just hit the highest rate in 5 years.

This means the pressure on private markets isn’t going away next year. Even as M&A gradually improves, sponsors still face shaky valuations, rising defaults, and economic pressure on portfolio companies.

There is still a long road ahead, with a deep portfolio backlog to clear, before fundraising can recover.

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