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Investment in buyout funds lifts US, European PE fund-raising in 2011

US private equity fund-raising regained traction after a slow third quarter, bringing the 2011 total to USD122.4 billion raised for 404 funds, according to Dow Jones LP Source.

This represents a slight drop in the number of funds that held closings but a 22% increase in capital from 2010, when 409 funds raised USD100.5 billion. During the fourth quarter of 2011, limited partners committed USD29 billion to 104 fund closings.

"The number of firms that raised USD2 billion or more in 2011 increased significantly over 2010, which helped drive overall fund-raising," says Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. "Even so, it was still a Dr Jekyll and Mr Hyde type of fund-raising market, with some firms hitting their fund targets and many others struggling to even get halfway to their goals. As more firms enter the fund-raising market in 2012, the gap between the haves and the have-nots promises to widen further as competition for investor attention increases."

In Europe, the fourth quarter was the strongest of the year for fund-raising as limited partners committed USD14.9 billion. For all of 2011, 140 funds raised USD52.9 billion, an 8% drop in funds that raised capital but a 53% increase in capital committed.

The increases in both US and European private equity fund-raising can largely be attributed to strength in the buyout sector. US buyout and corporate finance funds raised USD86.7 billion across 175 funds in 2011, a 42% increase in capital over the previous year. Within this sector, buyout and acquisition fund-raising increased significantly as 75 funds raised USD43.3 billion, more than double the 2010 total. Investment in co-investment funds also rose dramatically to USD1.4 billion for 10 funds after a particularly slow year in 2010 when seven funds raised just USD236 million.

In Europe, buyout and corporate finance fund-raising rose 88% to USD42.1 billion in 2011. Within the sector, buyout and acquisition funds saw the biggest spike as 40 funds collected USD28.4 billion, 165% more capital than the previous year.

US funds focused on investments in the secondary market collected USD5.8 billion for 20 funds in 2011, a 44% drop in capital collected from 2010. The decline follows three years of strong fund-raising for the sector, showing that general partners are more focused on investing funds than raising them.

Despite European secondary funds not closing on any capital in the fourth quarter, the fund-raising total for 2011 was up 45% over the previous year. In 2011, seven secondary funds raised USD4.9 billion.
Funds-of-Funds Commitments Rebound After Record Low in US, Fall in Europe

Interest in US funds of funds increased in 2011 as 45 funds raised USD8.9 billion, a 37% increase in capital collected from the same period last year. This gain, however, follows the worst fund-raising year on record for the sector.

After two years of nearly flat fund-raising for European funds of funds, interest in the sector dropped off significantly. Seven funds of funds raised USD398 million, just 10% of the total capital raised in 2010.
Strong Fourth Quarter for Venture Fund-Raising But Year-End Totals Still Lackluster

Driven by limited partners’ strong appetite for early-stage funds, US venture capital fund-raising had a strong fourth quarter that pushed the full-year fund-raising total just beyond that of 2010. US venture capital funds raised USD16.2 billion across 135 funds in 2011, a 5% increase in capital raised despite a 12% decline in the number of funds that won commitments. Annual fund-raising, however, is now just over half the 2008 total, showing that the industry has not yet bounced back from the recession. In the fourth quarter, venture funds raised USD5.2 billion, more than was raised during the second and third quarters combined.

In Europe, venture capital fund-raising set a record low as 41 funds raised USD3 billion in 2011, a 20% decline in the number of funds that attracted capital and an 11% decline in capital raised compared with 2010. The fourth quarter was the strongest of the year as funds raised USD991 million.

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