PEI: H1 fundraising reaches new high

Private equity firms raised more in the first half of 2017 since at least 2008, with the average fund size more than twice that of 2010.

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Private equity funds raised more capital in the first half of 2017 than any first half since Private Equity International began tracking fundraising in 2008.

PEI data show $264.2 billion was raised by 369 funds. This compares with $242.7 billion in H1 2016 and $205.2 billion in 2015.

The second quarter, which saw the close of both the largest-ever Europe fund and the largest-ever Asia fund, helped push the period to a high.

The top 10 largest funds closed during the period raised more than $99 billion between them. The largest was CVC Capital Partners VII, which set a European private equity record in June when it closed on €16 billion.

Other mega-funds which closed in H1 include Silver Lake’s $15 billion fifth fund, the $13.9 billion KKR Americas Fund XII and Clayton, Dubilier & Rice’s $9.35 billion tenth flagship fund.

The half saw the gap narrow between North America-focused and Europe-focused funds, with 29 percent of capital raised for North America and 21 percent for Europe. The largest proportion of capital raised – 41 percent – was multi-regional in focus.

Asia-Pacific also took a larger slice of the pie, accounting for 9 percent of capital raised, compared with 5 percent for the first quarter of 2017. In June KKR closed the largest-ever pan-continental fund, its Asian Fund III, on $9.3 billion.

But Canada Pension Plan Investment Board’s head of private equity for Asia argued there was now too much dry powder in the region.

“It's funds like us that is part of the problem as well as all of the domestic Chinese private equity money,” Deborah Orida, managing director, said at the FT Investment Management Summit Asia.

“KKR just raised a $9 billion pan-Asian fund and there's a ton of Chinese private equity firms that have a lot of money and not a long track record of discipline.”

The first half of 2017 also saw a notable jump in the average fund size, up to $716 million from $632 million for the whole of 2016, PEI data show. This number has been rising since 2010, when the average private equity fund closed was just under $300 million.

While this indicates strong LP appetite for the asset class, it is a cause for concern for some investors, who fear a lack of discipline among fund managers.

The head of alternative investments at AP7, the seventh Swedish national pension fund, Per Olofsson, told PEI in May “quick fundraising and funds growing bigger in size” were his main cause for concern in today’s environment, in which listed equity markets are expensive.