Challenges Facing Smaller Private Equity Funds

How to remain profitable whilst rising to regulatory challenges, including complex ESG compliance reporting requirements and due diligence.

Smaller private equity funds are undoubtedly facing significant hurdles in the current fundraising environment. This difficulty arises mainly because of their relative size and (often) lack of established track record compared to their larger counterparts. Investors tend to view larger funds as more reliable due to their history of managing substantial capital and delivering fairly consistent returns. As a result, smaller funds struggle to attract the same level of investor confidence and commitment.

In 2024, global private equity fundraising experienced a notable decline, decreasing by 30% to a total of $680 billion. This contraction in available capital has appeared to create a more competitive landscape, where only the most established and well-regarded funds can secure significant portions of the reduced capital pool.