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Putting the Results in Context:
81 private equity funds worldwide reached a final close in Q3 2010 raising an aggregate $57bn, a small increase from the $49bn raised in Q2 2010. Preqin would anticipate these figures rising slightly (10% - 20%) as further information becomes available. It is clear that fundraising remains extremely challenging, and is occurring at a fraction of the rate that the industry was seeing in 2006 – 2008. However, Preqin is projecting that conditions will continue to improve in Q4 2010 and beyond.- Fundraising by Region: Funds primarily focusing on the US have raised the most capital during Q3 2010, with 37 funds raising a total of $41.1bn. 21 primarily European focused funds raised an aggregate $8.3bn, while 23 funds focusing primarily on Asia and the Rest of World region gathered a total of $7.8bn.
- Fundraising by Type: Buyout funds raised the most capital, with 11 funds raising an aggregate $20.4bn. This figure includes Blackstone Capital Partners VI, which closed on $13.5bn in mid-July. Five distressed private equity funds raised an aggregate $8.9bn. 19 private equity real estate funds closed with total commitments of $8.8bn. Three infrastructure funds closed raising $8.3bn while 20 venture funds held final closes totaling $3.7bn.
- Funds in Market: After the number and aggregate fundraising target of funds in market fell consistently over the last year, Q4 2010 sees a small rise in both the number and value of funds being raised when compared to the previous quarter – possibly a sign of rising confidence among fund managers that conditions are starting to improve. There are currently 1,550 funds on the road seeking $573bn worldwide.
- Time Taken to Close Funds: For funds closed in 2010 the average time taken was 19.8 months, double the average time taken in 2004 – further evidence of the challenging nature of the fundraising market.
- Fundraising Momentum: The increased time taken for funds to achieve a final close is leading to more funds holding multiple interim closes in order to put capital to work while continuing to attract new investments. 44% of funds currently raising have held an interim close, with these funds seeking an aggregate $247bn. 13% of funds in market have now held two or more interim closes, meaning that they are likely to hold a final close within the next few months. This does indicate good momentum in the market and hints at possible improvement in the future.
- Looking Forwards: While the number of funds achieving a final close has remained low, the LP community is growing in confidence, and is planning to commit to more private equity funds in the future. In a survey of 100 conducted by Preqin in Q3 2010, 39% stated that they would be committing more capital in 2011 than 2010, with 49% committing the same levels, and only 12% intending to commit less.
- Longer-Term Prospects: LPs are mostly satisfied with how their private equity portfolios have performed, with 70% stating that private equity returns had met expectations. However, a significant 21% stated that returns had fallen short of expectations with only 9% seeing returns exceed expectations.
Comment:
“Although it is not yet coming through in the figures for fund final closes, we are seeing confidence in the asset class returning. Investors are increasingly enthusiastic about making new investments, partly as a result of increasing distributions coming their way, and also due to further improvement in existing fund portfolios as the industry continues to recover. Fund managers are responding, with some established names having launched new fundraising efforts in Q3 2010, and more planning to launch in the coming months.
Preqin has always reported fund closing statistics based on final close rather than interim close data, partially for reasons of consistency, but mostly due to this being the point in time when a lot of fund managers will begin to start putting capital raised to work in earnest. Although our figures show fundraising reaching a low point this year, much of the capital raised by funds achieving a final close in 2009 was actually committed prior to the financial downturn, with very little capital being committed in 2009 itself. We are now starting to see funds close which raised most or all of their capital post September 2008, showing that private equity investors remain confident towards the asset class and its ability to produce returns in the current financial climate.
Based on our conversations with institutional investors around the world, placement agents and fund managers, we are predicting that conditions will continue to improve slowly in 2010, with a more dramatic rise coming in 2011. We are projecting total fundraising for 2010 to reach around $260bn by the end of the year.” Tim Friedman, Company Spokesman
Preqin Research Report - Q3 2010 Private Equity Fundraising Update
