Description

Private equity firms are strug­gling to raise money des­pite offer­ing wide­spread entice­ments to attract new investor cash, under­scor­ing the depth of the con­trac­tion that is dent­ing the industry’s prof­it­ab­il­ity.

They raised just $592bn in the 12 months to June, their low­est tally for seven years, accord­ing to data from Pre­qin. The decline came even though firms offered man­age­ment fee cuts, “early-bird dis­counts” for investors who com­mit quickly to new funds and other incent­ives.

PE firms “are offer­ing a smor­gas­bord of dis­counts”, said Marco Masotti, global head of private equity fun­drais­ing at law firm Paul Weiss, who added in a report by the firm that they were “facing mount­ing fee pres­sure and agree­ing to a cas­cade of dis­counts”.

The industry’s fun­drais­ing has shrunk by nearly a third from its record levels in 2021. Higher interest rates and a slow­down in deal­mak­ing have left firms unable to sell tril­lions of dol­lars in age­ing invest­ments, caus­ing grow­ing frus­tra­tion among investors, many of whom are refus­ing to back funds.