European PEVC – going the extra mile to entice LPs

Mirroring wider global trends, fundraising across European private equity and venture capital (PEVC) is stagnating – and has been for some time now.

Although deal activity is slowly picking up, the GP market is still oversaturated – and with LPs calling the shots, they are demanding more than just good returns from managers.

Fundraising stumbles, but deals enjoy a renaissance

The last 12-18 months have sorely tested the resiliency of the PEVC industry – as volatile equity markets, high borrowing costs, sticky inflation, unpredictable US trade policies, and rocky geopolitics, caused deal activity and LP distributions to taper off. Unable to realise liquidity, some LPs in Europe have decided to scale back their PEVC allocations.

According to Invest Europe data, private equity raised EUR 120 billion in 2024, a 12% decrease in 2023, and a 16% decline from the previous five-year average[1]. The situation is challenging for VC funds too, according to Preqin data – with the asset class raising $19.12 billion in 2024, a marginal increase from the $18.9 billion it accumulated in 2023. This comes as six in 10 VC firms told an Invest Europe study that fundraising – or a lack of – continues to be one of the biggest barriers facing the industry[2].

“PEVC fundraising has been static, although the situation has slightly improved over the last few months. Even so, most of the current LP flows are being channelled into the larger GPs, at the expense of the small- mid-cap managers. It is certainly an LP driven market. We are seeing more managers having to extend their fundraisings – often by up to six months- so they can obtain critical mass,” said Vincent van den Brink, Commercial Director.

Just as fundraising is slowing down, PEVC managers are also being hit with rising costs, sparked by a combination of regulations, e.g. the updated Alternative Investment Fund Managers Directive (AIFMD), the Digital Operational Resilience Act (DORA), and increasing client requirements.

But as markets and geopolitics gradually normalise, European PEVC managers are beginning to dip their toes into the water again and execute deals.

“Across PEVC, we are seeing GPs look at deals with a focus on Artificial Intelligence (AI) and defence, but also communications, healthcare and life sciences. Deal flows are better than what they were last year, but there is clearly still a long way to go,” said van den Brink.

This broadly chimes with Invest Europe data, which found that private equity earmarked EUR 126 billion for investments in European companies last year – a 24% jump from 2023, and 9% above the previous five-year average. Similarly, venture capital investment in Europe totalled EUR 18 billion in 2024, which – again – was 19% higher than the previous five-year average[3].

Getting the LPs through the door

As investors tighten their purse-strings, a strong GP track record is no longer enough to secure institutional mandates – “There are a lot of similar – or like for like – GPs in the market, so firms do need to differentiate themselves if they are to win mandates,” said van den Brink.

He continued: “Liquidity is a good example here. Some GPs are having to be more generous in their terms and conditions. We have noticed a shift with some managers moving away from the traditional closed ended fund structure, and instead they are offering LPs semi-liquid fund structures. LPs want more flexibility and easier access to cash, particularly if there is a trigger event at the fund. GPs are having to acquiesce and re-think how they structure their funds.”

Equally, managers needed to demonstrate that their operations, regulatory compliance processes and governance frameworks are in good shape – a failure to do so will lead to LPs failing GPs on their due diligences.

The same is true for LP reporting – at a time when clients are becoming increasingly technology-enabled, the ability to report vital fund information frictionlessly and in digital format – ideally via easy-to-use-portals – will be vitally important.

This can be enabled by working with a quality service provider, such as JTC. “Our depth of solutions, which support managers with their various pre-marketing, operational, regulatory and reporting requirements, allows GPs to focus on what they do best – namely sourcing deals and raising money.”

“One of the USPs that differentiates JTC is that we are very agile and adopt a boutique approach to problem solving. When we onboard a new client, they will have a dedicated team allocated to them, and this is extremely important for asset managers,” said van den Brink.

To find out more about JTC’s private equity and venture capital solutions, visit our dedicated webpages.

[1] Invest Europe – May 8, 2025 – Private Equity Activity 2024

[2] Invest Europe – October 2024 – EIF VC Survey 2024: Market sentiment

[3] Invest Europe – May 8, 2025 – Private Equity Activity 2024