European private equity fundraising rose 6% in the first half of 2026 despite a sharp contraction in dealmaking and a 40% slump in divestments, exposing a growing disconnect between investors’ appetite for new funds and managers’ ability to deploy capital and realise existing investments.
New figures from industry association Invest Europe show that private equity and venture capital funds raised €67.6bn during the six months to June, up from a revised €63.8bn a year earlier, with buyout funds accounting for almost four-fifths of the total.
But investment into European companies fell 35% to €43.1bn, while divestments measured at original investment cost dropped to €13.2bn, their lowest half-year level since 2020.
The figures highlight the uneven nature of Europe’s private capital recovery, with fundraising increasingly supported by buyout strategies even as investment activity weakens across much of the market.
The divergence was particularly stark in buyouts, where fundraising climbed 29% to €53.6bn from €41.5bn a year earlier, while investment fell 42% to €24.5bn.
Buyout fundraising accounted for 79% of all capital raised during the first half, compared with about 65% in the equivalent period of 2025.
Growth capital managers faced a more difficult environment on both sides of their businesses, with fundraising falling 58% to €4.2bn, its lowest half-year total since 2016.
Investment into growth-stage companies also declined 48% to €6.8bn, following several years of relatively strong activity.
Venture capital fundraising was more resilient, slipping just 3% to €7.9bn, although that stability contrasted with a significant increase in investment into European start-ups.
The figures come as a separate survey conducted by Invest Europe and consultancy Arthur D Little suggests institutional investors are becoming more interested in European private markets amid geopolitical instability and uncertainty over US trade policy.
Some 43% of surveyed LPs expect to increase their European allocations over the next three years as a result of Washington’s trade stance, while 30% anticipate reducing their allocations to the US.
A further 29% expect to increase European allocations because of conflict in the Gulf.
The findings suggest that Europe’s relative attractiveness to institutional capital is improving, although the fundraising figures show that increased investor interest has yet to translate into a broad recovery in deployment.
Exit activity falls to lowest level since 2020
The deterioration in exits represents one of the clearest challenges facing European private equity managers.
Divestments measured at cost fell 40% from €22bn in the first half of 2025 to €13.2bn this year, with the number of companies exited also declining across investment stages. Buyout-stage divestments fell to €8.8bn, while growth-stage exits declined to €2.6bn.
Sales to other private equity firms remained the most common exit route, but their share of total exits dropped to 35%, following two years in which sponsor-to-sponsor transactions consistently accounted for more than 40%. Trade sales represented 29% of exits.
Public offerings provided a brighter spot, accounting for 13% of exits compared with 7% in the first half of 2025, reaching a double-digit share for the first time since the second half of 2021.
However, the improvement in the proportion of exits through public markets came against a backdrop of substantially lower overall divestment activity.
The weakness in realisations is particularly significant for managers seeking to return capital to LPs while raising successor funds, although the report does not directly measure distributions to investors.
Invest Europe’s figures measure divestments at original investment cost rather than sale proceeds, meaning they should not be interpreted as the total cash generated by exits or as evidence of changes in investment returns.
The association also cautioned that its first-half figures are preliminary and could increase as additional transactions are reported.
Continuation fund activity contracts sharply
Continuation funds, which have become an increasingly important part of the private equity liquidity market, also recorded a substantial slowdown.
Fundraising for European continuation vehicles fell 78% to €2.4bn from a record €11.3bn in the first half of 2025.
Investment through continuation funds declined 65% to €1.3bn, compared with €3.8bn a year earlier.
The decline contrasts with expectations in Invest Europe’s accompanying industry sentiment survey, in which many managers anticipated greater use of continuation vehicles over the coming year.
The survey also found that more than half of GPs were extending, or considering extending, holding periods for existing or successor funds.
Those findings point to different responses to the challenges of managing ageing portfolios, with some firms seeking additional time to realise investments rather than transferring assets into new vehicles.
However, the sharp decline in first-half continuation fund activity does not necessarily establish a sustained reversal in the strategy’s growth, particularly given the exceptionally strong fundraising comparison in early 2025.
The figures also cover continuation funds within Invest Europe’s European private equity dataset, rather than the entire global secondaries market.
Venture investment reaches record despite fewer deals
Venture capital was the principal exception to the broader decline in European private capital investment.
Investment into European venture-backed companies increased 11% to €11.5bn, the highest first-half total recorded by Invest Europe, despite fewer businesses receiving funding.
The increase was driven primarily by stronger investment in the UK and Ireland, alongside higher seed and later-stage venture investment.
Later-stage venture funding reached €5.9bn, compared with €4.0bn in the first half of 2025, while seed investment rose to €1.7bn. Start-up-stage investment was broadly unchanged at €3.9bn.
The figures indicate that the increase in venture investment was concentrated in larger financing rounds rather than a broad expansion in the number of companies attracting capital.
That pattern contrasts with the sharp contraction in buyout and growth investment, suggesting that investors remain willing to commit substantial amounts to selected technology and innovation businesses despite weaker activity elsewhere.
Deeptech investment was another area of strength, rising 35% to €8.5bn from €6.3bn a year earlier.
Invest Europe attributed the increase largely to stronger investment in the UK and Ireland.
Defence-related investment more than doubled from €1.3bn to €2.7bn, continuing the sector’s expansion amid increased European attention to security and military capabilities.
The accompanying sentiment survey suggests that managers expect this shift to continue, with 75% of GPs anticipating increased defence investment and 53% expecting greater investment in aerospace.
Deeptech and AI ranked as the second most popular investment theme, with 62% of managers expecting higher activity.
LPs shift towards Europe as managers prepare for consolidation
The contrasting investment and fundraising figures emerge as European private equity managers face pressure to adapt their strategies to geopolitical changes, technological disruption and a difficult exit environment.
Invest Europe’s sentiment research found that 69% of GPs believe consolidation within the private equity industry is already taking place, with most of the remaining respondents expecting it to happen soon.
Artificial intelligence has also become a central operational priority, with 82% of managers identifying AI as the biggest focus for their teams over the next year, ahead of exits.
Some 96% expect AI-supported working practices to have a major impact on operations over the next 12 months, while almost two-thirds identified AI adoption as the most important improvement initiative within portfolio companies.
Invest Europe chief executive Eric de Montgolfier said Europe’s stability and predictability were attracting capital towards its private markets amid geopolitical uncertainty.
The association’s research nevertheless shows that stronger fundraising and improving LP sentiment are not yet being matched by a comparable recovery in transactions or exits.
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