Private equity dry powder recedes from all-time highs amid slow fundraising

Private equity and venture capital's substantial dry powder reserves are a little lighter after an extended downturn in fundraising.

Global private equity dry powder — uncommitted capital available for new investments — stood at $2.184 trillion as of March 31. This was down 5.2% from its highest year-end total on record of $2.305 trillion in December 2023, according to an S&P Global Market Intelligence analysis of the latest available Preqin data.

Venture capital dry powder also hit its year-end high in 2023, peaking at $743.9 billion globally, and was down 19% to $600.9 billion as of March 31.

The declines in dry powder took place amid an extended slump in private equity and venture capital fundraising, with both fundraising totals and fund closes declining globally for three consecutive years between 2022 and 2024. Fundraising was on a turnaround course earlier this year. However, top-tier funds from established managers, who are reaping the benefits of an investor flight-to-quality trend, are having the easiest time securing fresh capital commitments, said Steve Chapman, a partner with accounting firm and private equity consultant Armanino.

"If you're a newer manager trying to raise a $500 million fund, it's going to be tough sledding," Chapman said.

Exits delayed

The relatively slow pace of exits since 2022 remains the primary challenge to private equity and venture capital fundraising, said William Barrett, a managing partner with Reach Capital, a placement agent that connects investors with private funds raising capital.

When portfolio companies are sold or taken public, profits flow back to investors in the form of distributions, who then recycle some of that capital into new fund commitments. But interest rate hikes that eroded corporate valuations and an uncertain macroeconomic outlook are prompting fund managers to hold onto portfolio companies longer.

"That's where most of the stress is, as of today," Barrett said.

A recent uptick in IPOs is reason for "cautious optimism" among venture capital fund managers, said Conor Moore, global head of KPMG's private enterprise division. But it will still take some time and a track record of strong exits to significantly boost fundraising prospects.

"It's probably going to be more going into 2027 after they've shown the exits, as opposed to 2026 itself being a banner year," Moore said.

Private markets growth

Shrinking dry powder reserves are a symptom of a challenging period for private equity and venture capital, but they do not tell the whole story. The institutional investors who supply much of the capital for both asset classes continue to bet big on private markets, and many are pivoting to emerging asset classes such as private credit and private infrastructure, said Gavin Geminder, global head of private equity for KPMG.

Private capital assets under management more than doubled between December 2018 and December 2024, when they exceeded $17.5 trillion globally, according to Market Intelligence's analysis of Preqin data.

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Dry powder alone also does not capture all the capital private equity firms have available for investment.

As regulators remove barriers that kept most individual investors out of private markets, funds are preparing for an influx of retail capital that will largely be raised through evergreen fund structures, Geminder said. At the same time, experienced institutional investors continue to prioritize investing directly into private equity deals alongside fund managers via coinvestments, a strategy that limits their exposure to management fees, Geminder added.

Outlook

Geminder forecast that private equity's focus in 2026 would remain squarely on exits and boosting the flow of distributions back to investors. However, it may take time for that to translate into stronger fundraising and a return to expansion mode for dry powder.

"If you're looking for a return to a great fundraising year, '26 is not going to be it," Geminder said.