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Strong private equity fundraising continues in 2014, but capital concentrated among fewer funds

977 private equity funds held a final close throughout the year raising a total of USD486bn, higher than any annual amount between 2009 and 2012, and on track to match the 2013 total. Preqin’s Christopher Elvin (pictured) reviews a year of private equity fundraising: 

Investor appetite for private equity remained strong throughout 2014, with the amount of capital raised by fund managers on a par with the last couple of years. It is likely that the figure will match the amount of capital raised in 2013 (USD531bn), as Preqin expects the 2014 fundraising figure to increase by 10-20% as more information becomes available. The stumbling block, however, has been the number of managers able to hold a final close, with this being at the lowest level since 2010. It is evident that the private equity fundraising market is still in a state of bifurcation. The largest, brand-name managers are receiving the majority of investor commitments, with smaller managers – particularly first-time funds – finding it difficult to raise capital. 

For the funds that did close, however, the average time to reach a final close has fallen by two months; funds that closed in 2014 took an average of 16 months, compared to 18 months on the road for funds closed in 2013. Given that the fundraising market is still so competitive, with a record 2,252 funds on the road seeking capital, it is likely that managers may continue to struggle to hold a final close in the coming year.

Five-hundred-and-twenty-five North America-focused funds held a final close in 2014, securing an aggregate USD282bn, down from 634 funds that secured USD332bn in 2013. San Francisco-based firm Hellman & Friedman raised the largest fund of 2014: the buyout fund, Hellman & Friedman VIII, closed at USD10.9bn in November.  Meanwhile, Europe-focused fundraising saw a slight increase, with funds focused on the region securing USD129bn in 2014, up from USD122bn in 2013.

For many fund managers, there was success in 2014; 52% of funds exceeded their fundraising target. This figure is up from 47% of funds that exceeded targets in 2013. A further 17% of funds closed in 2014 met their fundraising targets.

There are two key positives to come out of 2014: the falling average time on the road and the significant proportion of managers that are closing at or above target. Furthermore, investor sentiment towards the asset class remains very positive, and almost half of investors surveyed by Preqin in December expect to make their next private equity fund commitment in the first half of 2015. With a record number of private equity funds currently in market and capital increasingly flowing towards larger, more experienced managers, competition among smaller managers is likely to remain fierce.

Visit Preqin’s Research Center to view the most recent fact sheets and find out more about Preqin’s private equity data.

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