As with every big meal, digestion can take time - which appears to be the case with the private capital market.

The fast pace of fundraising in the private capital sector is slackening as the industry tries to digest money already put into the sector, according to industry figures.

Preqin, the research firm tracking areas such as hedge funds, private equity, private debt and real estate, said that 326 funds shut in the second quarter of this year, raising $159 billion. Last year, every quarter saw fundraising totals of more than $200 billion. Figures for last year showed record numbers.

The authors of the firm's report said they expect these totals to rise by up to 10 per cent as more information becomes available, "but it would appear that activity has returned to be on par with levels seen in most of 2015-2016".

"What is different from those years is how much capital is going to the largest fund managers – in Q2 2015, when the industry raised a comparable amount of capital, it was shared among around twice as many funds as closed in Q2 2018. The increasing domination of larger funds within their respective asset classes has never been more marked," Preqin said.

With conventional listed equity and debt markets suffering a squeeze on yields, caused by developments such as years of central bank money printing, aka quantitative easing, investors have sought returns from private capital markets instead. Private debt, for example, has benefited as traditional bank lending was squeezed after the 2008 financial crisis and by the arrival of new capital rules.

Victim of success
"The industry is possibly a victim of its own fundraising success: huge inflows have seen total private capital dry powder approach $1.80 trillion as of the end of June, with over $1.00 trillion alone available to private equity fund managers," Preqin said.

"Investors remain committed to most private capital asset classes, but it is possible that some may be waiting to see fund managers deploy some of that capital before making further investments," it continued.

"With so many options to choose from, the balance of power is swinging ever more in investors’ favour, enabling them to negotiate more favourable terms and fees. However, this does not extend to the largest and highest-profile funds, which remain routinely oversubscribed. These competing and contradictory elements of the industry may yet diverge further – there is no indication that the pressures of investors’ return goals, record dry powder, high valuations and a crowded marketplace are going to subside in the months to come," it added.

Within private equity, there's been a slowdown. The fundraising market saw a continued slump in Q2. The first quarter saw 246 funds close, raising a total of $88 billion – the first time in six quarters in which fundraising totals did not exceed $100 billion. Similarly, the second quarter recorded 234 fund closures worth a combined $86 billion.

In the second quarter, 22 private debt funds held a final close, securing a total of $25 billion in capital. This was a "significant" fall in fund closures from the 33 funds that closed in the previous quarter, although there was a rise in more than £5 billion in capital raised. Private debt fundraising centred around distressed debt this quarter, with five funds focusing on the strategy securing just over $14 billion. This is a significant increase from two distressed debt funds which raised $2.1 billion in the first quarter.

Finally, in the real estate area, some 48 funds secured a combined $23 billion, falling from 75 vehicles which raised $38 billion in the first three months of this year.