2007 set to smash fundraising records again

2006 may have seen private equity fundraising reach a new high, but the record is likely to be short-lived, according to the latest figures from research firm Private Equity Intelligence.

Preqin’s annual Global Fundraising Review will show that fundraising could reach $500 billion (€387 billion) for the first time ever in 2007. The research firm believes that the figure will be slightly higher than the equivalent number for 2006, when 684 new funds raised $432 billion between them.

However, with a number of large funds still yet to close, 2007 shows no signs of a slow-down. Kohlberg Kravis Roberts is still finalising its $16.6 billion fund, while Carlyle, Apax, Silver Lake and Goldman Sachs are just some of the other big firms still in the market.

Preqin estimates that nearly 900 funds are already in the market in 2007, and are likely to be joined by about 500 more during the year. This could push the total funds raised during the year to somewhere between $450 billion and $500 billion.

Fundraising has continued at a rapid pace in the last 12 months, as private equity firms make the most of increasing demand from investors for more exposure to the asset class following the excellent returns of recent years.

The 2006 total of $432 billion was a 38 percent increase on the previous high of $311 billion in 2005. Large buyout funds were the main driver of this growth, with the biggest ten funds raising $101 billion between them. Around half of the total raised went into buyout funds, while real estate funds were also popular, up 30 percent to $63 billion. Only venture disappointed, with total funds raised down 10 percent from the previous year.

Private equity’s ability to invest the huge sums raised shows no sign of slowing, according to the research.

In fact, the latest figures show that the industry is actually calling up committed capital faster than ever before – the amount of uncalled capital is actually less today than it was three years ago.

This faster rate of deployment explains why firms are returning to the fundraising market faster than ever before.  At the same time, the distribution of proceeds back to investors has also been on the increase – which is fuelling investor appetite further.