Long-dated funds have raised close to $50 billion in total since 2016, with Blackstone, KKR, Carlyle Group and CVC Capital Partners among private equity giants that have gathered capital for the strategy, according to PEI data.
For some, it has been a challenge attracting investors. Last week it emerged that BlackRock, which is in the market with its Long Term Private Capital fund, has had to scale down its ambitious $12 billion target to between $4 billion and $6 billion after reportedly “struggling to meet fundraising goals”, according to The Wall Street Journal.
The firm raised $3.44 billion in the initial offering period for the fund, according to a statement.
BlackRock did not provide further details on fundraising.
The idea of holding investments in a single vehicle with a longer-term view can have its merits. The strategy is “now an asset class”, said Blackstone global head of private equity Joe Baratta in an interview with sister title Buyouts last year. The firm raised $8.2 billion for its second long-life private equity fund in November, the largest vehicle thus far for the strategy. Silver Lake entered the arena in October with sovereign wealth fund Mubadala as its backer, while EQT is also exploring a long-term strategy.
However, overall, long-term funds are not a part of the market that has had significant growth in appetite from investors, according to Rede Partners co-founder Adam Turtle.
“The 10-year model is very entrenched,” he said. “There aren’t many funds in this area and those that have been raised are mainly by the mega-cap players who have strong LP relationships with large investors and long time horizons.”
An investor survey published in December by Probitas Partners found that respondents globally did not express strong interest (less than 5 percent of responses) in investing in long-dated funds with maturities significantly longer than 10 years.
“What the pandemic has done is make investors realise that there are shocks to the market that are very hard to predict,” said Turtle. “The pandemic has impacted the ability to underwrite deals for 20 years, which makes asset selection harder. For example, you would have thought that aviation-related assets would have been ideal for long-term funds, but clearly that sector has been significantly hit.
“Interestingly, certain tech assets may fit well in a long-term vehicle – companies where you see a long-term secular growth plan, a real robustness in the underlying revenue model and the prospect of constant compounding growth.”
Below is a list of the biggest players in the long-term vehicle strategy market and how much capital they have raised thus far.