Distressed fundraising drops 87%, secondaries soar 201%

Global distressed investment fundraising figures dropped 87 percent last year compared to the record-setting $45.8 billion raised in 2008, according to data collected by Probitas Partners.

“In the strong fundraising market of 2007 and 2008, many investors had already placed their bets on the few distressed managers they planned to back and were not looking to add new relationships [in 2009],” explained Probitas partner Kelly Deponte.

“In addition, a number of distressed managers invested significant capital too early in the cycle and were caught by surprise by the market collapse in September of 2008,” Deponte continued. “In the first half of 2009, these managers were suffering portfolio problems which LPs wanted addressed before committing more capital to the sector.”

Oak Hill Advisors was among the managers to raise capital for distressed investments last year, closing a $1.1 billion fund in September that was 50 percent oversubscribed.

At the other end of the spectrum, fundraising for secondaries vehicles hit a record high of $22.3 billion in 2009, making it the only private equity sector globally that surpassed its 2008 totals, Deponte said. From 2008 to 2009, secondaries fundraising totals increased an eye-popping 201 percent.

Partners Group, LGT Capital Partners, Portfolio Advisors, HarbourVest Partners, Pomona Capital and Goldman Sachs were among the groups that closed secondaries funds in 2009.