PE Funds Raised $76B In 2Q
Many fund managers seeking capital are expected to close at or near their fund targets in the next 18 months.
July 1, 2009
Private equity fundraising improved somewhat over the second quarter as 82 buyout funds drew $76.2 billion in new commitments, according to Preqin.
However, 30 fund managers decided against marketing new limited partnerships in the first half of year, totaling the same amount of cancelled fundraising launches for 2008. As a result, the number of funds in-market for capital has declined almost 10%.
While some fund managers have chosen to exit the market, others have successfully wrapped up their fundraising activity.
The Carlyle Group closed its fourth Asian growth capital fund at $1.04 billion; Aurora Capital Group raised almost $500 million for its special situations fund; and Rockwood Capital raised $964 million for a new private equity real estate fund.
Preqin, a London- and New York-based private equity data provider, interviewed 1,622 general partners involved in fundraising activities for its latest fund market analysis.
Buyout investment groups raised $60 billion in the first quarter, well below the $148 billion secured in the first quarter of 2008.
The number of managers seeking to raise funds well eclipses January 2008, when 1,304 general partners were looking for $705 billion. By contrast, this year's 1,622 fund partnerships are seeking $807 billion.
There's little argument among fundraising professionals that it's taking longer to raise capital for private investment partnerships.
For example, it has taken private equity executives an average of 18.3 months to close funds as compared to last year's 15 months. In the last two years, the time it takes to raise new funds has increased 53%.
The additional time it takes to raise new funds comes at a time when institutional investors are scaling back their investments in buyout funds to resolve asset allocation issues.
Buyout groups, meanwhile, have been unable to realize liquidity on investments, causing distributions to their funds' investors to decline 65%, according to Preqin.
Nonetheless, the fundraising data company is optimistic about the prospects for many funds in-market to hold final closings at or near their targeted amounts in the next 18 months.
Already, 710 funds seeking $382 billion have held preliminary fund closings.
Buyout funds drew the most capital in the second quarter -- $33.9 billion spread between 18 limited partnerships. Conversely, 21 venture capital investment vehicles raised $4.7 billion and 16 real estate funds closed on $8.9 billion. Two secondary funds trailed close behind, raising $8.4 billion.
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