Fundraising was robust in 2016, with a total raised amount of $428 billion, according to PEI data. This topped 2015, itself a strong year, by more than half a billion.
“Fundraising was driven by two things: strong performance of the asset class, and strong distributions to LPs that led to additional funding,” says Karl Adam, a director at placement agent Monument Group, who covers German-speaking Europe, Denmark and some UK-based investors.
For the fourth year running, 2016 saw a drop in the number of funds that missed their target. In 2012, 41 percent of funds failed to hit their mark, whereas last year, just a quarter of them did so, Adam notes.
Alongside these positives, average fund size has increased. PEI data show there were 664 funds contributing to the annual total in 2016, whereas 720 funds raised $427.4 billion in 2015.
But one partner at a UK-based firm that raised one of the year’s largest funds in 2016 expressed concerns about fund sizes growing prematurely.
“Our fund [from 2016] is 20 percent bigger than the previous one, but we’re seeing managers going up by 30, 50 percent, or even doubling the size in some sectors, like technology,” he tells PEI. “How can you expect the same organisation to manage a portfolio that’s twice as big as what they are used to?”
Commitment size is up too. “There was an average 20 to 30 percent increase in commitments from our investors who re-upped,” the partner adds.
And fundraising is only likely to grow in 2017.
“There were so many things that slowed people down last year, with Brexit and US presidential elections,” Eaton Partners partner Peter Martenson says. “There’s pent-up demand that sets us up for a decent 2017, as long as there are no major macro issues.”