Greater China private equity set for patchy recovery, modest fundraising boost

Greater China’s private equity market continued to recover last year amid expectations of a market improvement, but looking ahead, fundraising will remain selective and performance-driven, while geopolitical uncertainties are the largest variable for the markets this year, according to Bain & Co. Improving exit conditions and continued capital supply could offer attractive opportunities for well-positioned investors despite intensifying capital competition and a widening gap between top-tier and mid-tier firms, the consultancy said in its 2026 Greater China private equity report on Tuesday. “Recovery is under way but it is uneven and highly selective,” said Hao Zhou, head of Bain’s Greater China PE practice. “We are seeing capital flow to a narrower set of opportunities, particularly where investors have clear conviction on sector themes and the ability to actively drive outcomes post-investment.” Geopolitical uncertainties are the largest variable for the markets this year, he added. Yuan-denominated funds continued to grow and became the dominant source of new capital, with traditional US dollar-denominated general partners also raising yuan funds, according to the report. Notably, Greater China-focused US dollar-denominated fundraising declined further last year, in line with broader Asia-Pacific trends. The decline in US dollar-denominated fundraising reflects capital overhang in US dollar-fund portfolios that have yet to be exited and realised, limiting their ability to support new fundraising from partners. Meanwhile, Chinese sovereign wealth funds and state-owned enterprises continue to invest in yuan-denominated funds as the largest limited partners. Deal volume and value rose for a second consecutive year in 2025, with exits reaching their highest level since 2022, the report said. Secondary transactions drove activity in the early part of the year, while initial public offerings, a key exit channel, gained momentum from the second quarter onwards. Total exit value climbed to about US$53 billion in 2025, up from US$46 billion in 2024, according to the report. Valuation multiples edged higher as capital became concentrated in several key sectors such as semiconductors, advanced technology and pharmaceuticals. In addition, domestic general partners – locally based private equity managers responsible for all investment decisions – continued to allocate about 20 to 30 per cent of their capital internationally, leveraging their access to the China market, supply chain advantages and portfolio connections, the report said. Fundraising remained challenging and performance-driven, the report found, noting that fundraising had become increasingly concentrated among top-performing fund managers, with leading firms attracting a growing share of total capital raised. Only differentiated, sector-focused general partners with a repeatable model would be best positioned to raise capital and outperform, the report said. Firms capable of navigating market volatility and maintaining consistent execution were likely to benefit the most in the coming years, it added. “In this environment, differentiation is becoming critical,” said Stanley Chen, partner at Bain & Co. “Leading firms are combining deep sector expertise with more rigorous underwriting and hands-on portfolio management. The ability to execute consistently across the investment lifecycle – from sourcing to exit – is becoming a key differentiator.”