Private equity investors entrusted more capital to fewer funds in the first quarter of 2017, continuing the trend of capital consolidation that has played out over the last few years.
PEI data show 163 funds held a final close in Q1 2017, raising a combined $124 billion, compared with $102 billion raised by 169 funds in the same period last year, and $97 billion by 195 funds in Q1 2015.
The top 10 largest funds closed during the period raised more than $60 billion between them. The largest fund was KKR’s Americas XII Fund, which held a final close on $13.9 billion in March. The total included a sizeable GP commitment of 10 percent, made from a mix of the firm’s balance sheet capital and employee commitments.
The largest fund to close in the same period last year was a similar size – Advent International’s $13 billion Fund VIII – but between them the 10 largest funds in 2015 raised a combined $48 billion, considerably below this year’s total.
“Private equity funds are becoming notably larger in size, in general, with the mega and big buyouts getting much bigger in size, sucking the magnitude of capital and LPs away from the small, middle-market,” Peter Martenson, a partner at placement agent Eaton Partners.
Almost half of the capital raised in the period was collected by funds classified as ‘global’ in outlook. Among region-focused funds, there was a significant increase in the amount of capital collected by Europe-focused funds – $22.7 billion, compared with $9.4 billion for the same period in 2016 – which amounted to 18 percent of total capital raised.
North America-focused funds attracted 28 percent of capital, and just five percent went to Asia-Pacific.
The largest Asia-Pacific vehicle closed in Q1 was fund of funds Axiom Asia’s latest vehicle, which smashed through its $750 million target to close on $1.028 billion in January.
Annual global fundraising totals have been creeping up year-on-year since 2014, when $424 billion was raised by 809 funds. in 2016, $439 billion was raised by 691 funds. Judging by the strong first-quarter figures, 2017 is likely to see around $450 billion raised by somewhere between 675 and 700 funds, Martenson predicted.
Look out for the full PEI Q1 Fundraising Report 2017 in May