As 2025 begins, the outlook for mid-sized private equity (PE) fundraising is optimistic, signaling a potential reversal of recent trends in the sector. Mid-sized funds, typically ranging between €100 million and €5 billion, represent the core of the PE industry. In contrast to megafunds, which dominate the headlines and skew aggregate data, mid-market funds offer a more accurate reflection of the health of the industry. With significant changes anticipated, this article explores the factors underpinning the positive trajectory for mid-sized PE fundraising in 2025.
A Rebound in Fundraising After a Challenging Period
Recent years have been tough for mid-market fundraising, particularly in Europe. After peaking at more than €70 billion in capital raised in 2021, fundraising in this segment experienced sequential declines, landing at just over €50 billion by late 2024. This downturn was largely attributed to higher interest rates and a muted exit market, which limited the distributions that Limited Partners (LPs) could reinvest.
However, 2025 brings renewed optimism. PitchBook ’s analysts forecast a reversal of the downward trend, projecting a return to year-over-year growth. With deal activity recovering—expected to have grown 25% to 30% year-over-year in 2024—the groundwork has been laid for a rebound in fundraising to 2022 levels. While still below the record-breaking numbers of 2021, this recovery signals the resilience of mid-market funds.
The anticipated monetary easing by central banks, including the European Central Bank (ECB), is expected to create a more favorable financing environment for private equity. Lower interest rates will reduce borrowing costs, facilitating deal-making and capital allocation to mid-market funds.
Bloomberg highlights this shift, noting that "the tide is turning for private equity in 2025, spurred by a more supportive rate environment and a restart of M&A and IPO activity."
Recovery in the Exit Market
A more active exit market is crucial for boosting fundraising. Distributions from exits provide LPs with the liquidity they need to reinvest in new funds. The improved exit environment in late 2024 sets the stage for increased capital flows into mid-market PE funds.
Long-Term Growth of PE as an Asset Class
Private equity continues to attract new types of investors, including sovereign wealth funds, family offices, and high-net-worth individuals. The secular growth of PE’s assets under management (AUM) further supports the optimistic outlook for fundraising. As noted by the Financial Times, "The secular growth of private equity as an asset class is bolstered by its appeal to a wider array of investors seeking higher returns in a low-yield world."
Regional Insights: Europe’s Recovery
Europe’s mid-market fundraising is poised for recovery after a challenging period. Pitchbook’s analysis underscores that 2025 could see capital raised return to 2022 levels, driven by improved economic conditions and deal activity.
The U.S. Mid-Market: A Parallel Growth Story
In the United States, the mid-market also stands to benefit from favorable economic conditions. Interest rate reductions are expected to ease financing constraints, while a more stable macroeconomic environment should bolster deal-making and fundraising.
Challenges and Risks to Monitor
While the outlook is positive, certain risks could temper the pace of recovery. Geopolitical tensions, economic volatility, and unexpected policy shifts could create headwinds for mid-market fundraising. Additionally, during periods of economic uncertainty, LPs often prioritize experienced managers with proven track records, which tends to favor megafunds over mid-market funds.
