PE Tech Report


Like this article?

Sign up to our free newsletter

Private equity fundraising records lowest total since 2004

Private equity fundraising has had its worst year since 2004, with only USD246bn raised by 482 funds worldwide in 2009, according to research by Preqin.

This is 61 per cent down on the USD636bn raised in 2008 and 62 per cent down on the record USD646bn raised in 2007.

Q4 2009 represents a low point for the year, with only USD35bn raised by 75 funds – the lowest quarterly total since Q3 2003.

Of the USD246bn raised in 2009, buyout funds raised the most capital, with USD102bn raised by 84 funds. A total of 170 venture funds raised USD27bn, while 96 real estate funds raised USD41bn.

In Q4 2009, 13 buyout funds closed with an aggregate USD14bn, 24 venture funds closed with USD4bn, and 17 real estate funds closed with USD7bn.

Funds focusing primarily on North America raised the most in commitments over 2009, with 228 funds raising an aggregate USD145bn. A total of 136 funds focusing primarily on Europe raised USD74bn, while 118 Asia and rest of world funds raised USD27bn. In Q4 2009, North American funds raised USD19bn, European funds USD11bn, and Asia and rest of world funds USD5bn.

The largest fund to close during 2009 was CVC European Equity Partners V, which closed early in the year with EUR10.75bn in commitments. The vehicle invests in mid-market companies in Europe.

The largest fund to close in Q4 2009 was Clayton Dubilier & Rice VIII, a buyout fund targeting companies in North America and Europe. It closed at the very end of 2009 with total commitments of USD5bn.

The average length of time taken for a fund to reach a final close has increased dramatically over the last two years, and now stands at more than 18 months for funds closed in 2009, up from one year for funds closed in 2007.

Over the course of 2009, 60 per cent of private equity investors surveyed made at least one new commitment to a private equity fund, while 40 per cent of investors did not make any new commitments.

Just over half of investors plan to make their next commitment to a private equity fund in the first half of 2010, and 16 per cent plan to wait until the second half of the year.

“Fundraising conditions have been extremely challenging in 2009, with a significant number of investors holding back from making new investments,” says Tim Friedman, head of communications, Preqin. “Our survey of over 100 leading LPs, conducted in December 2009, shows that just 60 per cent of investors have made new commitments in 2009, with many of these institutions investing in far fewer funds than in previous years. 

“Although the recovery in the public markets and adjustment in private equity fund valuations has alleviated the denominator effect that many investors were suffering from at the start of 2009, we are finding that many backers of private equity funds have fundamentally altered their attitudes towards the asset class.

“We are seeing investors focusing more on understanding the state of their existing portfolios and spending considerably more time when considering new vehicles. Negotiating terms and conditions has become more of a key concern, and we are seeing a trend away from the bigger mega-buyout funds towards more of a focus on smaller mid-market and regionally focused vehicles.”

Like this article? Sign up to our free newsletter