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US private equity fundraising falls 3 per cent to USD132.7bn in first half of 2008

Despite woes in the buyout market, private equity fundraising continues to hold its ground, according to industry newsletter Dow Jones Private Equity Analyst, which says US private equity

Despite woes in the buyout market, private equity fundraising continues to hold its ground, according to industry newsletter Dow Jones Private Equity Analyst, which says US private equity firms raised USD132.7bn in 185 funds in the first six months of 2008.

The first-half total was just 3 per cent short of the USD137.2bn raised by 199 funds during the first half of 2007. The full-year fundraising record is USD313bn, set last year.

‘For first time since 2003, we’ve seen year-on-year fundraising actually decline as some of the bigger firms – Blackstone Group, Carlyle Group and Madison Dearborn Partners – ran into delays raising capital for their latest buyout funds,’ says Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst.

Leveraged buyout fundraising declined 20 per cent, with firms raising only USD85.5bn for 75 funds, down from USD107.6bn raised in 91 funds in the same period of 2007. Seven ‘mega firms’, defined as managers raising funds of USD6bn or larger, raised a total of USD36.6bn, only slightly less than the USD37.4bn raised by eight mega firms last year.

‘The weakness in the buyout industry, however, has been offset by strong fundraising by mezzanine funds and a decent showing by venture capital funds,’ Rossa adds.

Mezzanine fundraising set a new first half record with USD24bn raised by seven firms, thanks almost entirely to Goldman Sachs Capital Partners’ record USD20bn GS Mezzanine Partners V fund, which includes USD7bn of leverage. Venture capital fundraising grew by 15 per cent from USD10bn raised by 62 funds last year to USD11.5bn raised by 72 funds.

Warburg Pincus closed the largest buyout fund of the first half with its USD15bn Warburg Pincus Private Equity X. The largest venture capital fund belonged to Lightspeed Venture Partners, which raised USD800m for its Lightspeed Venture Partners VIII fund.

European private equity firms saw an upswing in investment in the first half of 2008, with nearly USD61.1bn invested in 80 funds, a 16 per cent increase from USD52.5bn invested in 81 funds during the same period of 2007. Buyout funds accounted for USD54.8bn, or nearly 90 per cent of the European fundraising total.

‘The differing fortunes of European private equity funds are an indication that limited partners are shifting some attention away from the US, where the economy is seen as particularly weak and where many of LPs are over-concentrated,’ Rossa says.

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