Capital raised worldwide reached $69 billion between 1 July and 30 September, according to PEI data. That's a drop of 45 percent from the $126 billion raised in the second quarter, and 28 percent below the $95 billion in the corresponding period last year.
“People are taking it slowly [in committing their capital to private equity] due to the potential outcomes they perceive in the global economy, such as the question of interest rates,” Peter Martenson, partner at placement agent Eaton Partners, tells PEI.
Fundraising deceleration isn't applied evenly across the industry, however. There is still a “two-speed” market, in which hot funds fly to a final close, while others struggle to push the process along.
“The highly sought-after managers are able to raise capital extremely quickly in this environment, but the same could apply to the most interesting first-time funds,” says Aberdeen Asset Management's US private equity co-head Scott Reed. “On the other hand, I can think of half-dozen groups that have been fundraising for nearly two years and haven't held a final close.”
The mature private equity markets continue to attract the most capital, with North America seeing $35 billion-worth of fundraising, far ahead of global strategies on $11 billion.
“The US remains a very fertile ground for investors, and though we are seeing a bit of a lull right now – perhaps attributable to the upcoming election, which follows on the heels of summer and Brexit – I expect you will continue to see fundraising,” Babak Nikravesh, a partner at law firm Hogan Lovells, tells PEI. “Investors don't necessarily view other geographic markets as better options.”