Private equity fundraising floundered in the second half of 2011, with the funds that closed in the final quarter of the year raising a similar amount to those closed the previous quarter (USD54.4bn), according to Preqin. However, the firm expects the Q4 figure to increase by around 10-20% and exceed the Q3 total as further information becomes available.
Despite a strong second quarter, in which 189 funds closed having collected USD88.4bn in commitments, the annual total amounted to USD262.6bn, less than the USD274bn raised in 2010, although again Preqin expects the figure to increase to match and perhaps exceed the 2010 total as more information becomes available.
Geographically, Europe-focused funds were the least prolific amongst those closed in Q4 2011. Buyout funds accounted for the largest proportion of capital raised during Q4 2011 – the 19 funds to close raised a combined USD18.4bn. EQT VI was the largest fund to hold a final close in the quarter. The European buyout fund raised EUR4.75bn.
Buyout funds contributed the largest amount to the overall capital raised; 92 such funds closed having raised a combined USD69.2bn. Venture funds were the most numerous of funds to close; 133 finished fundraising and pulled in an aggregate USD32.3bn. On average, the length of time a fund spent in market fell during 2011 from 18.7 months in 2010 to 16.5 months. The USD7bn Lexington Capital Partners VII, a secondaries fund, was the largest fund to close in 2011.
There are currently 1,823 funds on the road seeking an aggregate USD739.6bn. Some 73% of investors plan to make new commitments in 2012, according to a Preqin study undertaken in December 2011. A total of 35% of investors are below their target allocations to private equity, 49% are at their target allocations and 16% are exceeding their target allocations.
“Despite the initial positive outlook, fundraising proved to be very difficult in 2011 and the year ended with two of the poorest quarters for private equity fundraising since before the market downturn,” says Helen Kenyon, Senior Manager and Preqin Spokesperson. “Despite almost three-quarters of investors planning to make at least one new private equity investment in the next 12 months, the record number of funds on the road means that the market will remain extremely competitive during 2012.
“Add to this the fact that re-ups are being closely scrutinised – 84% of investors are considering new fund manager relationships – and managers will need to think carefully about the fund terms and conditions they offer investors in addition to their proposed strategies in order to achieve fundraising success.”
