Private equity defies pandemic to raise record $180bn in Q1

Fundraising looks on track for another successful year with the most raised between January-March this year than any other equivalent period post-GFC.

Private equity fundraising is off to a strong start this year amid a mixed picture for respite from the coronavirus pandemic, with the biggest amount raised for first-quarter fundraising since the global financial crisis.

At least $180.2 billion was gathered by 277 funds between January and March, a figure that is 10 percent higher compared to the equivalent period last year, preliminary PEI data show.

The latest increase is fuelled by buyout and growth equity funds, which accounted for almost 70 percent of capital raised for the quarter.

“As the pace of vaccination picks ups and the global economy shows increased signs of recovery, the environment for fundraising continues to improve,” Peter Martenson, partner at placement agent Eaton Partners, noted in the firm’s latest LP Pulse Survey Results.

The average fund size in the first three months of this year dropped 7 percent to $663 million, compared with $712 million in the same period last year.

KKR’s $15 billion haul for its fourth Asia fund was the largest vehicle raised during the quarter and is also the biggest PE fund targeting the region. It is nearly 40 percent larger than the next largest fund to close in Q1 – Apax Partners10th vehicle – which gathered $11 billion.

Two growth vehicles and two secondaries vehicles also made it to the 10 largest funds list. Blackstone held the final close on its debut growth equity fund on its $4.5 billion hard-cap, the “largest first-time growth equity private fund, raised in history”, according to the firm, which cited third-party data. Secondaries giant Coller Capital collected more than $9 billion for Coller International Partners VIII, which includes co-investment capital.

Competition for investor capital is fierce this year, according to a partner at a London-based placement firm.

“That trend last year in which LPs only backed existing relationships went away quickly, because they realised the pandemic will be with us for longer-term and they could still do due diligence and make capital commitments remotely,” the partner said. Still, the bar for first-time funds remains high: offering discounts or incentives to LPs may not always work because established managers are also offering those, the partner added.

That sentiment is echoed by a chief investment officer of a global investment consultant.

“If you are fundraising with a newer, emerging fund that is first or second vintage, it’s been harder to tap into the larger, institutional pools of capital,” the CIO said. “Some of the old routes of doing so have dried up, which is likely to continue for a couple of quarters more.”

As of mid-April, the largest funds in the market include Hellman & Friedman Capital Partners X, EQT IX and KKR North America Fund XIII, which are targeting $20 billion, €14.75 billion and $14 billion, respectively.

This year is likely to see a raft of growth mega-funds. Among those reported to be in market are General Atlantic, which is seeking up to $5 billion for its fourth flagship growth fund, and Thoma Bravo, which is said to be eyeing $3 billion for its debut growth fund.