Europe braces for mega-fund mania

Investors may struggle to keep pace as European private equity houses plot a flurry of huge fundraises over the next 12 months.

London’s Apax Partners will return to market early next year, according to a source with knowledge of the firm. The firm hit the $9 billion hard-cap on its Fund IX in December 2016.

Compatriot Cinven will seek at least €8 billion for its seventh flagship private equity fund late this year, according to reports. The firm – which amassed €7 billion for the Sixth Cinven Fund in 2016 – is understood to be in the process of arranging due diligence meetings with investors.

Switzerland-headquartered Partners Group is reportedly seeking around €5 billion for its fourth buyout fund, while UK-headquartered Permira is expected to target around €10 billion for Fund VII.

“There really is a big batch of managers coming down the manufacturing line, which will lead to some tough decisions because I don’t think investors have the appetite or capacity to invest in every one,” Paul Newsome, co-head of private equity investments at investment firm Unigestion, told Private Equity International. The firm’s latest fund of funds vehicle is Euro Choice VII, a 2017-vintage with a €300 million target, according to PEI data.

“We’re already taking a hard look at the managers coming back next year and we can’t do all of them. At the same time there are new relationships which we’ve been tracking and will want to back – it’s going to create a big headache for everyone.”

Private equity shops typically raise at least as much as their previous vehicle, provided there are no hiccups along the way. Cinven, Partners Group, Permira and Apax could therefore gather around €30 billion between them.

Mega-funds won’t be limited to Europe. Boston’s Advent International is another that could return in the next 12 months, given the firm held the final close on its eighth flagship in 2016, amassing $13 billion.

A heady fundraising environment has contributed to increases in fund size over the past two years. Firms collected $411 billion across 545 vehicles in 2017, compared with $364 million over 646 funds in 2016, according to PEI data. Last year’s average fund size of $754 million was 44 percent higher than 2008’s $524.4 million.

“From a GP’s point of view you can see why they have accelerated their fundraising timetable,” Newsome added. “They want to benefit from the very attractive fundraising environment right now and to raise quickly in case the music stops.”

Advent International, Apax Partners, Cinven, Partners Group and Permira declined to comment for this piece.