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US and Europe private equity fundraising remains strong overall, says Dow Jones LP Source

Private equity funds in the US raised nearly as much capital in the first three quarters of 2012 as during the entire 2011 calendar year, according to Dow Jones LP Source.



In addition, 2012 commitments from limited partners in Europe are on track to surpass 2011 fundraising.
 
During the first three quarters of 2012, US private equity firms raised USD130.1bn for 326 funds, a 36 per cent increase in capital raised despite 19 fewer fund closings as compared with the first three quarters of 2011, and nearly matching the USD131.5bn total capital raised during 2011.

In the third quarter alone, 111 US funds raised USD40.6bn as compared with 121 funds in the second quarter of 2012 that raised USD47.3bn, a decline of 14 per cent in capital raised.
 
In Europe, fewer funds raised more capital during the first three quarters of 2012 compared with the year-ago period. Private equity firms raised USD47.8bn for 118 funds in the first three quarters, a 20 per cent increase in capital raised.
 
However, momentum since the second quarter has slowed. Thirty seven European funds raised USD8.9bn during the third quarter, a 42 per cent decrease in the amount raised compared to last quarter.
 
“US private equity firms have worked hard to return capital to their investors over the past two years and that’s given investors both additional capacity and confidence to fund new commitments,” says Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “Although it’s far from easy to raise capital today, more private equity firms have the wind at their backs than did even a year or two ago.”
                                                                     
Several categories of private equity funds in the US, including buyout and corporate finance funds, and diversified funds, saw spikes in fundraising capital so far this year versus the same three-quarter period last year.
 
During the first three quarters of this year, US buyout and corporate finance funds raised USD96.2bn for 149 funds, a 43 per cent growth in capital compared with the same period in 2011.
 
Most notably, capital raised by diversified private equity funds more than tripled. Seventeen diversified funds raised USD13bn in the first three quarters of 2012 compared to the same number of funds raising just USD4bn in the same period last year. In addition, 29 funds focused solely on buyouts and acquisitions raised USD17.3bn in capital during the third quarter, 18 per cent more than the second quarter.
 
Mezzanine funds raised USD7.9bn for 21 funds during the first three quarters of 2012, a 74 per cent increase in capital from the year-ago time period despite seven fewer funds.
 
Investment in secondary funds rose by 42 per cent for the first three quarters of this year to USD5.4bn.
 
Funds of funds continue to see a downward trend. During the third quarter, four funds raised USD717m, the lowest seen since the third quarter of 2009, and a 50 per cent decline in capital fundraising from the third quarter last year, in which 13 funds raised USD1.4bn.
 
The largest fund during the third quarter was Advent International Corp.’s Advent International GPE VII LP, which raised an initial USD8.4bn of a fund targeting USD9.3bn.
 
The largest closing of the third quarter was Ares Management’s Ares Corporate Opportunities Fund IV LP, a buyout fund that closed at USD4.7bn.
 
Despite a high first quarter of committing USD23.5bn, limited partners in European funds have continued to slow their investment pace over the course of this year.
 
Thirty seven European funds raised USD8.9bn in the third quarter of 2012, a 42 per cent drop from the second quarter when 36 funds raised USD15.4bn, and a 30 per cent drop from the third quarter last year when 37 funds raised USD12.8bn.
 
During the first three quarters of 2012, 54 buyout and corporate finance funds raised USD32.1bn, a slight three per cent increase in capital from the year-ago time frame. Within this segment, buyout and acquisition funds saw a 46 per cent decline as 21 funds raised USD12.8bn.
 
Mezzanine funds did not fare well in the first three quarters as three funds raised USD475m, down from USD1bn raised for the same number of funds during the year-ago time frame.
 
Investment in secondary funds increased by 79 per cent during the first three quarters of this year to USD8.7bn.
 
US and European venture capital funds continue on track to exceed fundraising totals from 2011, which were USD19.7bn from 153 funds and USD4bn among 55 funds, respectively.
 
During the first three quarters of 2012, 120 venture capital funds in the US raised USD17.5bn, a 38 per cent increase in capital from the same time period in 2011.
 
The 39 European venture funds, which raised USD3.2bn, saw a 58 per cent increase in capital from the third quarter of 2011.
 
US early-stage venture capital funds raised nearly twice as much capital compared to the same period last year. Seventy one funds raised USD4.5bn during the first three quarters of 2012 versus 63 funds that raised USD2.3bn during the same time period last year.
 
The largest venture capital fund that closed during the third quarter in the US was Sequoia Capital’s Sequoia Capital US Growth Fund V, a late-stage venture fund that closed for USD950m. Also during the third quarter, New Enterprise Associate’s New Enterprise Associates XIV held a final close on their USD2.6bn multi-stage venture fund.
 
Dow Jones LP Source classifies multiple fund closings (first, interim, final) separately to provide an accurate view of the fundraising environment.

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