Don’t call it a bellwether

Industry insiders are anxiously watching the progress of a number of funds in market – but pointing to any one firm’s fundraising experience as a paradigm of wider trends could be misleading, writes Christopher Witkowsky.

Words like “bellwether” get tossed around a lot these days, especially when it comes to private equity fundraising. Just this week the Wall Street Journal, while not using that particular term, opined that the success of Apax Partners’ next fund – which is not even in the market yet, nor, our sources say, does it even have a preliminary target – could be the proof of a “private equity revival”.

Apax, of course, isn’t the only large-cap firm the financial press has focused on. BC Partners’ efforts to collect €6 billion for its ninth fund has for months been characterised as a bellwether that will indicate how easily (or not) other firms of similar size and strategy will find the fundraising market.

As has The Blackstone Group’s Fund VI, which after more than two years in the market is expected to soon close on $15 billion, less than the $20 billion the firm had originally sought (it later revised its target to $15 billion).

Eagerness to assess the fundraising market is easy enough to understand: 1,200 to 1,500 funds are expected to come to market in 2011, depending on who you talk to, and GPs and advisors are hopeful that the tough fundraising market which took hold post-financial crisis might finally begin to ease.


It’s also simple to see why people focus on fundraises like BC’s and Blackstone’s. BC was essentially the first mega-fund to come to market since the financial crisis and is offering LPs a 5 percent discount on fees and carry to cement commitments for the first close. Meanwhile, Blackstone, which also typically offers incentives for LPs (for those that commit more than $1 billion), is one of the industry’s most recognisable names that has raised record buyout funds in the past. Many have pointed to these fundraises as proof (or lack thereof) of LP appetites for buyout funds post-crisis and the concessions needed to gain their commitments.

While it’s true that in many respects GPs are competing for capital from the same institutional investors around the world – many of which still aren’t making the same level of commitments seen between 2005 and 2007 – what some observers and commentators often too easily overlook is that not all firms are fundraising with the same set of circumstances.

Take BC, for example. During the downturn, it had some high-profile hiccups with a few portfolio companies and installed its next generation of leadership. It has also recently booked some blockbuster exits and made clear its commitment to becoming a significant player in the North American private equity market. Blackstone, meanwhile, is not your average private equity firm – it’s a publicly traded global asset manager with an increasing array of business lines.

There are other funds hitting the market this year that will likely be watched closely as people try to gauge the fundraising market, in search of concrete indicators. But don’t be too quick to judge any one firm’s success or difficulties as representative of the market as a whole – for each brings its own unique “story” along with its PPM.