The Only Way Is Up
- jebaltonaga
- Mar 20
- 3 min read
The only way is up A growing number of first-time managers have been preparing to launch funds amid hopes the fundraising market has reached its nadir. That's according to Fraser van Rensburg, a founder and managing partner at placement agent Asante Capital Partners, who notes that a significant percentage of these new managers are high quality with track records from established investment firms. “[Launching] first-time funds is always going to be challenging… but we are in a cycle [where] more first-time fund managers are taking on the opportunity because the cycle has bottomed out,” van Rensburg tells Side Letter. “We saw that after the Global Financial Crisis and after the tech bubble in the early 2000s… Once the green shoots come through, you always see a plethora of first-time fund opportunities.”
After three challenging years in fundraising, the market has shown signs of a recovery since H2 2024, van Rensburg adds. Sectors like healthcare and technology are gaining more momentum than others because they have been less affected by the ongoing tariff war. “Technology always just needed a trigger to come back,” van Rensburg says, adding that a normalised valuation environment in the tech space has boosted manager confidence.
Private equity experienced one of its most underwhelming years in fundraising last year. Funds closed on $746.48 billion, down 18 percent from the $911.85 billion raised in 2023, according to Private Equity International’s 2024 Fundraising Report. This marks PE's lowest annual total in four years.
Around half of respondents to PEI's LP Perspectives 2025 said they would consider backing emerging PE managers in the next 12 months. A growing number of investors have, in recent years, launched programmes dedicated to this opportunity set. VC funds were identified as the most compelling emerging manager strategy, followed by PE. More than two-thirds (67 percent) of LPs surveyed agreed that only emerging GPs led by PE execs with strong experience from top-tier firms will raise easily in this market.
Affiliate title Buyouts' Emerging Manager Survey, published in December in partnership with Gen II Fund Services, also found that an overwhelming majority (96 percent) consider track record to be the most important consideration for emerging managers, with team composition and investment strategy the next two most significant factors.
Only 55 percent of respondents to the Buyouts survey, which ran from August to October, were in fundraising mode, down from 79 percent the prior year. PE fundraising more broadly appears to be a case of haves and have-nots at present; no doubt the emerging manager community will be no exception to this rule.
Avoiding unwelcome distractions Though they're fast becoming an industry norm, continuation vehicles continue to divide opinion. While some LPs remain unconvinced, others, like Ontario Teachers' Pension Plan senior managing director Jeff Markusson, believe they are a positive development for the asset class.
“We actually quite like the continuation vehicle theme,” Markusson said during a panel at NEXUS last week. “We think that you actually get positive selection bias in terms of being able to stick with businesses that the private equity fund has convinced themselves that they want to hold for a longer term.”
Markusson said PE firms have come to the same conclusion: that “selling businesses creates a lot of friction” since they “put a management team on ice” for several months while they put together a process that’s distracting and can “create a lot of leakage in returns”.
CVs can navigate this, he noted. “I think it's actually been a healthy trend as opposed to perpetually putting these businesses in sale mode and distracting management teams as part of it." |