Outlook 2026: Primary Fund Placement

The Foundations of a Fundraising Recovery

Following a somewhat challenging period for private equity fundraising, optimism is increasing for a resurgence throughout 2026. One of the key prerequisites, a strengthening M&A market, is already in process. “We’re seeing acceleration in the M&A market,” says John Neuner, Harris Williams Co-CEO. “Increasing transaction volumes are being supported by financial and strategic acquirers looking to invest across a broader base of sectors, sponsor desire to generate liquidity for their investors, the improving rate environment, and favorable credit markets.”

As of the fourth quarter of 2025, Harris Williams’ M&A volume of active client engagements was up significantly year over year, with continued acceleration in the pace of engagements coming to market. “Harris Williams is seeing robust pitch activity, more transactions going to market and generating healthy valuations, and a strong backlog of high-quality opportunities,” adds Bob Baltimore, Harris Williams Co-CEO. “In fact, many of these metrics are at or approaching record levels.”

“As funds execute more successful exits and new investments, delivering returns to limited partners, fundraising will follow suit,” says Frank Edwards, co-head of Primary Fund Placement. “That bodes well for an active 2026.”

Stephen Lessing, co-head of Primary Fund Placement, observes that while the 2026 fundraising market is poised for a recovery, it will be a more disciplined, bifurcated market with a higher bar for sponsors to clear. He notes that this is driven by the maturation of limited partner programs, particularly in North America, which is leading to greater consolidation of manager relationships. At the same time, somewhat restrained M&A and IPO markets in recent years have limited capital distributions to limited partners, putting incremental investments under more scrutiny.

“These conditions have contributed to a market in which capital flows are increasingly concentrated,” says Lessing. “In fact, the vast majority of capital is being allocated to funds with over $1 billion in assets, and is flowing to managers raising their fourth fund or a successive vehicle, showing limited partner preference for established track records.”

Overall, that means fundraising in 2026 will be closely correlated with a differentiated ability to generate liquidity for investors. Similarly, private equity groups receiving strong support from existing investors will have greater fundraising success. At the same time, opportunities are expanding for both established and emerging sponsors to set themselves apart from the pack and make the most of this year’s fundraising opportunities.

Three Key Differentiators for 2026

“Limited partners want to see that sponsors can deliver better results than the competition,” says Edwards. “While a data-supported narrative on past performance is powerful, it’s not necessarily enough to fully tap into limited partner hunger for improved returns in 2026.”

Specifically, says Edwards, fund managers can attract stronger limited partner interest in 2026 by emphasizing their ability to offer exposure to specialized opportunities, leverage unique sourcing methodologies, and deploy more successful approaches to operational value creation.

Granular Specialization

“We’ve seen successful fundraisers anchoring their strategies in specific, well-defined, granular themes backed by megatrends,” notes Lessing. “For example, a manager might build a thesis around the increasing power requirements for AI data centers, focusing on a specific segment of the value chain.”

Lessing points out the importance of developing detailed, tangible, and actionable perspectives on megatrends: “It’s important to go beyond a superficial perspective on megatrends and identify concrete and differentiated opportunities arising from a deeper understanding of an industry, trend, or business model.”

For example, he says, data centers require more advanced cooling technology, specialized electrical products and services, and a host of other “picks and shovels” that are creating a wide range of investable opportunities. Another example would be focusing on the manufacturers of specialized transformers and switchgears, which are critical bottlenecks in the broader megatrend of electric grid modernization required for the energy transition.

Unique Sourcing Capabilities

Relatedly, a unique deal sourcing strategy can provide a tangible “edge” that limited partners seek when their portfolios are already mature and they have exposure to mainstream strategies. Examples we are seeing include a focus on small businesses, on niche subsectors overlooked by other funds, or on tapping into new sources of capital.

“Family offices and specialized wealth management firms are actively seeking differentiated investment strategies that may not be available through larger institutions,” says Edwards. “Accessing these fragmented capital pools requires general partners to build targeted relationships and cultivate deep market knowledge.”

This approach can be especially differentiating for independent sponsors, which frequently operate in niche market segments and focus on smaller transactions. “There’s a very healthy and robust cohort of limited partners and other sources of capital that seek to back deals sourced by independent sponsors outside of a fund structure,” explains Edwards. “These investors appreciate the ambition and creativity of independent sponsors, as well as their knowledge of pockets of inefficiency or smaller deals not on everyone’s radar.”

Unlocking Portfolio Company Potential

A repeatable methodology to drive fundamental operational improvements in portfolio companies is another increasingly important differentiator for sponsors. Harris Williams is seeing more general partners establish dedicated operations teams, a practice now being adopted even by some emerging managers. These internal resources can assist portfolio companies with strategic initiatives, operational efficiencies, and talent management, thereby contributing to growth.

Such portfolio company improvements include implementing sophisticated pricing strategies to capture incremental margin, leveraging the sponsor’s scale to centralize procurement and reduce supply chain costs across the portfolio, and driving digital transformation projects that optimize back-office functions through automation and AI. Operations-focused sponsors are also streamlining operations with lean manufacturing principles and optimizing sales force effectiveness to accelerate top-line growth. These hands-on efforts are crucial for boosting EBITDA and creating measurable value ahead of an exit.

“Top-quality assets attract strong buyer interest in any market,” says Lessing. “Sponsors that can help unlock the full potential of their portfolio companies through hands-on operational improvements are realizing better returns on their investments and enticing limited partners to get or stay involved in their approach to value creation.”

Optimizing 2026

As the fundraising market gathers momentum throughout 2026, private equity groups that can demonstrate a competitive advantage—whether through a distinguished track record, granular investment theses, a unique sourcing network, or deep operational capabilities—will make the most of the opportunity.

“For both established and emerging sponsors that possess a unique strategy, deep industry expertise, and a differentiated ability to create value, 2026 will provide plenty of potential to capture market share and solidify their position for the next decade,” says Edwards. “We’re excited to play a role in what should be a much-improved fundraising environment in the months to come.”