By Joe Woodbury, Senior Director, Funds
A tough year for fundraising – but innovation is thriving
If you’re a UK-based fund manager, you’ve probably felt the squeeze this year. After a brief rebound in 2024, private equity activity slowed sharply in early 2025, reaching its lowest point since late 2020. According to KPMG UK’s mid-year private equity pulse, deal volumes had dropped 17.1% year-on-year, with only 726 deals completed in the first half of 2025 compared to 876 during the same period in 2024.
While this decline in deal-making activity had eased by the end of Q3 – with Preqin Pro data showing that UK private equity deals totalled 1,982 in the first three quarters of 2025 compared to 2,000 during the same 2024 period – PwC has estimated that private equity firms are sitting on around $1 trillion in unsold assets globally, limiting liquidity and slowing the pace of reinvestment.
Venture capital hasn’t fared much better. With IPO and M&A activity still sluggish, many managers are rethinking their approach.
The result? A wave of creativity in how capital is raised and deployed. This article explores some of the most innovative approaches that have been gaining traction in 2025.
GP-led secondaries and continuation funds: liquidity with control
GP-led secondaries and continuation funds have become essential tools for managers looking to unlock liquidity while maintaining control. Though often lumped together, they serve different purposes:
- GP-led secondaries are broader transactions initiated by a GP to restructure or provide liquidity
- Continuation funds typically involve transferring one or more assets into a new vehicle managed by the same GP
GP-led secondaries continue to gain momentum as managers seek liquidity without relinquishing control. GP-led secondary transactions have made up a significant portion of this activity and are projected by PitchBook to grow into a $70 billion to $105 billion market by 2028, as traditional exit routes remain constrained.
UK managers are increasingly turning to continuation funds to retain high-performing assets. However, these vehicles often involve complex negotiations around valuations, the mechanics of transferring assets from existing funds, and onboarding new limited partners or investors.
Deal-by-deal investing: a tactical path to fund formation
Deal-by-deal investing is booming. For UK managers, it’s a way to build a track record, gain investor trust, and stay agile. Platforms like Inven and Grata are helping managers source their first deals in high-growth sectors like:
- AI and generative AI
- Robotics and automation
- Data centres and infrastructure
- Battery storage and energy transition
This model allows managers to participate in promising companies alongside a select group of investors seeking differentiated opportunities. Many managers are ‘warehousing’ two to four deals – temporarily acquiring and holding assets during or ahead of fundraising – to demonstrate deal flow and performance. By showcasing tangible investments rather than relying solely on a blind-pool structure, managers can capitalise on live investment opportunities whilst also attracting LP interest through transparency and proven execution.
Independent sponsor funds: growing momentum in the UK
The independent sponsor model – also known as fundless sponsors – is also gaining traction in the UK. In the United States, it’s already well-established, but it is increasingly being seen by new and established UK-based sponsors as a flexible, investor-aligned alternative to traditional blind-pool fundraisings.
Ben Cocoracchio, a partner at Addleshaw Goddard (one of the leading law firms in this space), explains that “although the fundraising environment is challenging, there continues to be a wealth of attractive investment opportunities, so it’s no surprise that talented investment teams are looking for alternative approaches to get deals done.”
Cocoracchio adds: “We are seeing interest in this model across the board, whether that is experienced operators and investors looking to launch a new platform, individuals or teams spinning out of an established PE sponsor to establish a new strategy, or established PE sponsors looking to take advantage of specific opportunities between fundraising cycles or alongside their existing blind-pool funds”.
The investor view and what’s driving the growth?
LPs like the deal flow and alignment – but they’re cautious. The common refrain is: “Come back when you have a live deal.” That makes pre-deal planning tricky, but it also rewards managers who can move quickly and build strong networks that can then be used for future deals or when the GP is in a position to launch a fund.
- LPs are increasingly open to deal-by-deal structures; being approached with a tangible/live investment opportunity is proving to be a more tactical approach for a newer investment team versus “just another” pitch deck
- LPs may have been directly impacted by lack of liquidity in close-ended fund structures or just be more driven by an investment opportunity that they can attempt to quantify/DD, as opposed to committing capital into a new investment team
- Data supports that LPs are narrowing down on their existing GPs, exploring GP-led secondaries, CVs or co-invest opportunities. It’s increasingly difficult for newer GPs to raise co-mingled funds with LPs that they haven’t previously raised capital from
An evolving market?
While the independent sponsor market is still fairly nascent in the UK and Europe (versus the U.S., for example), the market is evolving rapidly. Jan Gruter, another partner at Addleshaw Goddard, comments: “We established our flagship Independent Sponsor Forum just over a year ago and the attendance for the most recent London edition exceeded 300. We have now gone on to host a DACH-focused event in Munich, which had over 200 attendees.”
When asked what is next for the independent sponsor market, Gruter adds: “I’m really excited to see how this space will evolve over the next few years – as the market matures and becomes more familiar to sponsors and capital providers, I expect we will see institutionalisation of the investor-base and standardisation in terms. Our inaugural Independent Sponsor Deal Terms Survey is a good stepping stone in that regard and I wouldn’t be surprised if some of the big industry associations come on board to bring together the community and help catalyse standardisation.”
Tax reform is fuelling fundraising innovation
One of the key catalysts behind the shift in fundraising strategy has been tax reform. From April 2025, the UK increased the capital gains tax rate on carried interest to 32%, with further changes in 2026 that could push the effective rate to 47% for non-qualifying carry. To mitigate this, the government introduced a 72.5% multiplier for qualifying carry, reducing the effective rate to around 34%. However, qualifying is complex – dependent on holding periods, co-investment structures and more.
These changes are prompting managers to rethink traditional fund structures. Rather than launching blind-pool funds, many are turning to deal-by-deal fundraising, which offers greater flexibility, delays carry structuring and reduces upfront tax planning. This shift isn’t just reactive; it’s strategic. By adapting to the new tax landscape, managers are finding more transparent, investor-aligned ways to raise and deploy capital.
Hosted platforms and the appointed representative model
At IQ-EQ, we’re seeing increased demand for hosted platforms, especially among emerging UK fund managers (including independent sponsors), as a fast-track route to market. By becoming an appointed representative (AR) of an FCA-authorised firm, managers can conduct regulated activities – such as deal sourcing (‘Arranging deals in investments’) – without needing direct authorisation. This model offers regulatory cover, operational support and compliance infrastructure, allowing GPs / independent sponsors to focus on building their track record and investor base while reducing time and cost to launch.
How we can help
We support UK managers across all these alternative fundraising strategies:
- Appointed representative services, to conduct regulated activities – such as deal sourcing (‘Arranging deals in investments’) – without needing direct authorisation
- Deal execution support for independent sponsors and deal-by-deal managers
- Compliance, AML/KYC and investor onboarding
- Fund administration for continuation vehicles and secondaries
- Ongoing accounting and investor reporting services
- Bespoke solutions for evolving investor needs
Whether you’re launching a continuation fund, seeking to ‘spin out’ an existing asset, or building your first deal-by-deal portfolio as an independent sponsor, we provide the operational backbone to help you scale with confidence.
Final thoughts: Creativity is the new currency
Fundraising is no longer about following the old playbook. It’s about being creative, agile and finding ways to get in front of LPs. UK managers who embrace these alternative strategies – and build trust through transparency and performance – are the ones who will thrive.
If you’re exploring new fundraising routes, get in touch with us today. We’d love to help you navigate the journey.
