How much runway is left for fundraising growth in private equity? It’s a question occurring to analysts on the large publicly traded firms’ earnings calls as investors approach target allocations to the asset class and sponsors themselves pin hopes for future growth on retail and high net worth investors. And could easily provide a readthrough to middle-market fundraising prospects.

While funds are hitting and regularly even exceeding targets, the time spent on the road raising funds is creeping higher, according to data above from Preqin. The trend coincides with limited partners nearing their target allocations to private equity: the median public pension fund has committed 6 percent to the asset class versus a 7.5 percent target, with similar shortfalls among insurers, endowments, wealth managers and sovereign wealth funds. Family offices are actually overallocated at the median by 4 percent.

Is the asset class approaching a saturation point? Among some institutional investors, the answer is clearly yes. KKR is pivoting to increase fundraising from private wealth, which historically constituted 10 to 20 percent of total hauls, to far higher. “We believe over time that it should be 30 to 50 percent of the money that we raise,” CFO Rob Lewin told investors at yesterday’s earnings call.

The figure doesn’t just ring alarm bells for this writer; the statement prompted an analyst to question the size of that future fundraising share during the Q&A portion of the call as well. KKR co-CEO Scott Nuttall, when asked whether macroeconomic conditions were affecting LP allocations to private equity, said there was “No change in LP appetite, if anything we’re seeing more interest in real assets with yield,” on yesterday’s earnings call.

And indeed, some types of investors still have a much larger gap to close. Preqin data shows banks below target PE allocation to the tune of 4.4 percent, corporate investors by 14.5 percent and government agencies by 8.7 percent.

But it is unclear that demand will continue to outstrip the supply of general partner vehicles, especially as dealmaking conditions erode the attractiveness of return profiles. High deal multiples are only part of the story here. Seller friendly terms are also making the path to blockbuster exits narrower.

The structure of last year’s largest LBO, Medline’s stake sale to a consortium of Hellman & FriedmanBlackstone, and Carlyle Group looks like a seller’s dream. The founding family will retain the largest stake, senior management stays in place, and at 50 percent, the reported equity check financing the deal places less debt pressure on the target’s balance sheet. The same factors make the financial sponsors’ exit path less clear. Keeping existing management, reducing leverage and committing to investment rather than cost reductions are a recipe for smaller returns.

The push into high net worth fundraising is a well-publicized growth play for larger PE firms, but it has largely been framed as a search for new capital rather than a necessary bid to maintain fee growth. Lengthening roadshows, smaller commitment gaps from the most eager PE allocators, and persistent analyst questions seem to indicate, however, that the party won’t last forever.

Brandon Zero