Many private equity investors are pulling funding amid deal apocalypse

Sovereign wealth funds and state pension providers are among investors telling money managers they’ll only commit in their upcoming fund raises if their capital tied up in old funds is released, according to people with knowledge of the matter. 

Additional requests range from fee discounts and more co-investment opportunities, to greater information rights and representation on committees, the people said, asking not to be identified because the requests are private. Some are even asking for a cut of the fund’s management fee or an opportunity to buy a stake in the fund manager, the people added. 

“We’re now undergoing a real cultural change,” said William Barrett, managing partner at Reach Capital, a private-market fundraising firm. “It’s the first time we’re seeing LPs being so straightforward and linking a distribution from one fund to a new commitment in another. They’ve never been so precise with their asks.”

The relationship between private equity firms such as Blackstone Inc. and Apollo Global Management and their backers is symbiotic. Large fund managers cannot scale their platforms without money from the biggest so-called limited partners, while the investors need managers with the capacity to accept large swathes of capital. 

But the balance of power is shifting within the $8 trillion private equity industry as buyout funds struggle to return money to investors amid disagreements between buyers and sellers over corporate valuations. That’s handing more power to LPs to dictate the terms of engagement.

As money rolling into private equity slowed last year, the heft of a handful of funds who make the majority of investments into private markets — such as sovereign wealth funds from the UAE, Saudi Arabia, and Qatar — has become even more persuasive. 

Just five years ago, funds from the Middle East didn’t make the top 10 state-owned investors of private markets, according to data from Global SWF. By 2023, five were from the Gulf — including Abu Dhabi’s ADQ and ADIA.

In some circumstances, funds including ADIA and Singaporean sovereign-wealth fund GIC are among investors specifically asking for distributions to be returned to them from older vintages as they discuss upcoming fundraises, some of the people said. To be…