The primary growth drivers for private equity—sovereign wealth and private wealth channels—prefer concentrating capital in large, brand-name firms. This capital shift starves middle-market players of new funds, leading to a likely industry contraction where many may have unknowingly raised their last fund.

Historically, private equity was pursued for its potential outperformance (alpha). Today, with shrinking public markets, its main value is providing diversification and access to a growing universe of private companies that are no longer available on public exchanges. This makes it a core portfolio completion tool.

The term 'private equity' is now insufficient. The M&A market's capital base has expanded to include sovereign wealth funds and large, tech-generated family offices that invest directly or co-invest like traditional PE firms. This diversification creates a larger, more resilient pool of capital for deals.

By aggregating data across numerous client funds, fund administrators gain a unique, ground-level view of market trends. Based on current fundraising struggles and cycles, Sontera predicts a strong resurgence in PE fundraising activity in Q4 2025 and Q1 2026 as market fatigue from the 2021-22 boom subsides.

When private equity firms begin marketing to retail investors, it's less about sharing wealth and more a sign of distress. This pivot often occurs when institutional backers demand returns and raising new capital becomes difficult, forcing firms to tap the public for liquidity.

The next major growth wave in private credit will come from non-U.S. clients, particularly Asian insurers. These firms have only ~5% of their balance sheets in private credit, compared to 35-40% for their U.S. counterparts. Closing this gap represents a largely unpenetrated, significant opportunity.

The 15 largest PE firms control 20% of industry AUM and have mastered capital aggregation through insurance and wealth channels. Their primary business challenge is now deploying this capital into enough quality deals, while every other firm still struggles to raise funds.

Previously, PE firms could raise a fund and then largely ignore LPs for years. Today's competitive landscape demands constant, 'off-cycle' relationship building. Firms that only appear with their hat in hand when they need money will fail to secure commitments from sophisticated institutional allocators.

Institutional allocators are currently over-allocated to illiquid private assets due to the denominator effect. When distributions from these funds finally resume, the initial wave of capital will be used to rebalance portfolios back toward public markets, not immediately recycled into new private equity commitments, a trend private GPs may not see coming.