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US and European private equity fundraising have best first half since 2008

Limited partners showed strong support for US and European private equity funds in the second quarter, helping both regions achieve the best first half for fund-raising since 2008, according to Dow Jones LP Source.



In the first half of 2012, US private equity funds raised USD86bn for 235 funds, a 27 per cent increase in capital raised despite a four per cent decline in fund closings from the first half of 2011. In the second quarter alone, US funds raised USD44bn.

European private equity funds raised USD37.3bn for 79 funds in the first half of 2012, a 39 per cent increase in capital but a 10 per cent decline in fund closings compared to the same period last year. In the second quarter, European funds raised USD14.2bn.

"Overall, private equity firms produced a record level of distributions in 2011 and that’s paid off in the form of increased commitment volume to the asset class," says Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. "Limited partners also had a lot of choices given that many veteran firms returned to the fund-raising trail this year."

US buyout and corporate finance funds raised USD59bn for 108 funds in the first half, a 30 per cent increase in capital from the year-ago period. Within this segment, LPs are gravitating toward funds focused on a specific industry such as financial services, energy or technology. Twenty-three industry-focused funds raised USD13.8bn during the first half, the strongest first half on record for these funds. Dow Jones LP Source has been tracking private equity fund-raising since 2000.

Also within the buyout and corporate finance segment, 44 buyout and acquisition funds raised USD24.3bn, a 31 per cent increase in capital. Diversified private equity funds had their best first half on record as 18 funds raised USD12.7bn.

More money flowed into venture capital in the first half. Eighty-two venture capital funds raised USD13bn in the first half, a 31 per cent increase in capital from the same period a year ago.

Mezzanine funds raised USD7.2bn for 17 funds in the first half, more than double the capital raised in the year-ago period despite two fewer fund closings.

Investment in secondary funds rose 33 per cent to USD4.7bn for 11 funds.

Funds of funds bucked the upward trend as capital commitments to the segment fell 65 per cent to USD2.1bn for 17 funds.

Limited partners in European funds tempered their investment pace in the second quarter after committing USD23.1bn in the first quarter, which was the best first quarter on record. While the USD14.2bn committed in the second quarter was a much more moderate investment pace, it nearly matched the USD14.6bn raised during the same period last year.

In Europe, 33 buyout and corporate finance funds raised USD23.9bn in the first half, an eight per cent increase in capital. Within this segment, buyout and acquisition funds saw a 41 per cent decline in capital as 16 funds collected USD10.2bn. Diversified private equity funds made up for the loss by raising USD10.1bn for seven funds, more than 10 times the capital collected in the same period last year for the same number of funds.

Twenty-seven European venture funds raised USD2.3bn, a 26 per cent increase in capital raised for the same number of fund closings compared to the first half of last year.

Investment in secondary funds more than quadrupled as eight funds raised USD8bn. Funds of funds also saw a significant increase in investment as eight funds raised USD2.8bn, up from five funds that raised USD269m in the same period last year.

Mezzanine funds did not fare well in the first half as two funds raised USD224m, down from USD1bn raised for three funds during the first half of last year.

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