Private equity firms in the middle market are inking more deals and pursuing more exits, and that momentum is starting to trickle down into fundraising. But fears remain that this recovery will not be enough for many smaller managers.

In the first four months of 2026, US PE funds collected nearly $120 billion—a 30% jump from the same period last year, according to PitchBook data.

Fundraising for the middle tier of the market ticked up sharply. Vehicles sized between $100 million and $5 billion captured 65% of the total, compared with 56% in the same period of 2025 and 55% in 2024. These vehicles collectively raised $77.4 billion, just shy of the $77.5 billion peak set in 2023 and surpassing the first four months of every other year since at least 2016.

More managers, buoyed by pulling off one or two exits in recent quarters, are preparing to return to market later this year, said Steve Zaorski, a partner at law firm Ropes & Gray who leads private fund formation for PE firms targeting vehicles of $1 billion to $6 billion.

“I’m cautiously optimistic that fundraising is going to rebound in the second half of the year and surprise people,” he said.

Those realizations have taken different forms, according to Zaorski: some through M&A transactions, others through continuation funds.

That confidence is supported by an improving sentiment in the deal market.

“We’re hearing directly from GPs that they are seeing more transactions in the market, but importantly, they are also seeing more quality deals in the market,” said Kelly Phelan, a partner at placement agent and secondaries adviser Asante Capital.

If that translates into actual exits and distributions back to LPs, it sets up the back half of the year well.

“We’re not there yet across the board, but the direction feels right,” she said.

A wave of middle-market funds reached final closes in the past few months. Among them are established names such as L Squared Capital Partners, which in April closed its fifth PE fund at a hard cap of $2 billion, and Emerald Lake Capital Management, which closed an $825 million pool last month to back founder-owned businesses in the industrial and services sectors.

Emerging managers were also well-represented. Percheron Capital, in April, raised $3.1 billion for its latest pool targeting essential services businesses. Truelink Capital, formed by former Platinum Equity executives, raised $2 billion for its sophomore fund.

Not everyone shares that optimism.

Several industry sources warned that the recovery in fundraising for much of the market could remain spotty, as exits and realizations remain easier to come by for larger managers.

Middle-market funds that closed in the first four months of 2026 averaged approximately $1.06 billion, their largest average size in at least a decade, according to PitchBook. Even within the middle-market, there are clear winners and losers.

Pat Lanigan, a partner at Chicago buyout shop Twin Bridge Capital Partners, said he expects LPs to remain selective for at least the next 12 to 18 months, putting more pressure on GPs that have been fighting to keep their heads above water since 2022.

That pressure is shrinking the compensation pool and cracking some firms from the inside.

An investor who backs PE funds in the middle and lower-middle market told PitchBook that about every two months, a call comes from a partner at a buyout firm who is walking out the door because their most recent fund closed too small to generate the carry needed to meet their earnings expectations. Some dealmakers strike out on their own as independent sponsors, some jump ship to another firm, some just collect their chips and retire.

Those that can’t raise large enough funds have to reduce headcount and hold onto existing portfolios until a clearer interest-rate path emerges, borrowing conditions become more favorable, and inflation fears ease.

Few expect the dynamic to reverse quickly, including Jed Johnson, who heads the GP Solutions business at ORIX Corporation USA.

“There won’t be enough carry economics to go around and feed all the mouths.”

This article originally appeared on PitchBook News