It's a bad time to launch first-time funds, but that isn't stopping investors

Axios

17-06-2025

Conventional wisdom is that now is a terrible time for private market investors to launch first-time funds. But that isn't stopping a slew of folks from trying.
The big picture: Limited partners are seeing a wave of general partners spinouts, and many expect that the trend will outpace industry consolidation, according to a recent Coller Capital survey.
One major reason, they say, is that firms have done a lousy job nurturing homegrown talent.
Coller's questionnaire didn't go a level deeper, but it's not too hard to read "tilted fund economics" in that response. Everyone inside a firm knows who brings in the home run deals, and if that rainmaker doesn't get compensated like one.
By the numbers: 38% of LP respondents said they expect the number of new managers to increase over the next three to five years, compared to just 33% who say they expect it to decrease.
The "increase" cohort was particularly strong among Asia-Pacific respondents (64%).
Coller also found that 36% of LPs report the number of spinout funds within their portfolio has increased within the past few years, while only 3% said it's decreased. The majority said it's remained flat.
Zoom out: Raising a first-time fund is never easy, and many believe the process has become even more challenging as LPs have sought to shrink their manager rosters — preferring to plug larger amounts into multi-strategy firms.
Plus the VC/PE distribution drought that's reduced the amount of available LP capital.
On the other hand, LPs also worry that too much mega-fund exposure won't allow them to beat industry benchmarks — which means many are willing to bet on a few emerging managers to provide alpha.
What they're saying: "It's like the old phrase: people hate Congress but love their congressperson," a veteran LP tells me. "A lot of people are super risk averse (and liquidity crunched) right now, making emerging funds a challenge to raise, but known quantities de-risk the decision for those who are able to put out capital."