Is Private Equity Fatiguing?

Private markets, once the preferred destination for institutional capital, are facing a sharp slowdown. Global private equity fundraising fell 35% year-on-year in the first quarter of 2025, while private credit is also under strain. With exit markets stalled and distributions lagging, limited partners are turning to more liquid strategies. Hedge funds recorded their largest quarterly inflow in over a decade, while digital assets attracted $60 billion year-to-date, boosted by US regulatory clarity and new spot ETFs.

The reallocation towards liquid, transparent, and flexible investments suggests more than just a short-term market adjustment. As macro uncertainty persists and liquidity remains a premium, capital may continue flowing away from illiquid private markets toward strategies that can adapt quickly to shifting conditions. The question for allocators is whether this marks a cyclical pause or a fundamental change in portfolio construction.