PE funds seeking $250bn this year

Private equity firms are seeking a record $250 billion in funding this year – and much of this demand will be met, says a new survey.

The 2005 Global Fundraising Review by information provider Private Equity Intelligence says over 800 funds around the world will attempt to raise $250 billion (€192 billion) during this year.

It estimates that at least $200 billion will be raised, due to strong demand from limited partners (LPs). The survey points out that on aggregate LPs are currently $160 billion short of their target private equity allocation, and that the avalanche of new funds in the market will provide them with the opportunity to address this shortfall.

LPs will be encouraged, the survey says, by “strong positive cash flows from their private equity investments during the past year”.

A figure of $200 billion would easily surpass the $136 billion of funds raised around the world in 2004, which was itself nearly double the amount collected in 2003.

According to the survey, of the $136 billion raised last year: $57 billion was garnered by 70 buyout funds; $29 billion by 115 venture funds; $10.7 billion by 26 funds of funds; $7.4 billion by ten distressed debt funds; $5.5 billion by 12 secondaries funds; and $4.3 billion by 15 mezzanine funds.

The survey said placement agents were used by 20 percent of all funds in the market last year.