Private equity fundraising reaches post-crisis high

Capital raising by PE firms across all strategies rose $74.5bn from the previous year as Asia-Pacific gave Europe a run for its money.

Fundraising by private equity firms reached $537.2 billion last year, the highest amount raised since the financial crisis, according to Private Equity International’s Annual Fundraising Report 2019.

Total capital raised over the last 12 months increased 16 percent from 2018’s $462.7 billion, with more funds closed compared with the prior year – 812 funds against 784 – PEI data show.

The average fund size was $662 million, the highest yearly average since 2014.

“While the headline figures for capital raised are robust, it is worth noting that the number of buyout and growth funds closed in 2019 is approximately half of the 2017 figure,” said Karl Adam, a partner at placement firm Monument Group. “As such, the average fund size has grown dramatically.”

Adam added that the proportion of capital raised by the largest funds continues to climb, reflecting the dynamic of many GPs returning to fundraising early with significantly larger funds. As a result, some LPs are heavily capacity-constrained due to re-up decisions, both in terms of available capital and team/due diligence, Adam noted.

Buyout funds attracted the most capital, accounting for more than 62 percent of capital raised, followed by growth strategies at 14 percent and venture capital at 9 percent.

The largest fund to hold a final close last year was Blackstone Capital Partners VIII. According to a US Securities and Exchange Commission filing from December, the fund raised $24.5 billion, including a GP commitment of $500 million. According to Blackstone, that figure does not include $1.7 billion in management fees, equal to 7 percent of the $24.5 billion, which would take the final amount of the fund up to $26.2 billion – the largest private equity fund ever raised.

Permira gathered €11 billion for its seventh flagship fund and TPG Partners raised $11.5 billion for its eighth buyout fund.

By number, VC funds had the most final closes, comprising 38 percent of all funds closed for the year.

By region, Asia-Pacific-focused fundraising inched closer towards the total raised by Europe-dedicated funds, with $51 billion versus $62.6 billion. LP appetite for the region is evidenced by investors such as Dutch investor APG Asset Management, which will at least double its allocation to Asia private equity over the next five years, while the California State Teachers’ Retirement System is also expected to double or triple its Asia allocation by 2021.

Another reason behind the close totals for Asia and Europe could be that more pan-European funds are expected to come back to market this year with record targets for their flagship vehicles.

US-dedicated vehicles made up close to 40 percent of total capital raised, retaining the spot as the largest regional fundraising group.

PEI fundraising data covers private equity strategies (buyout, growth equity, turnaround, secondaries, funds of funds) and venture funds that raise institutional LP capital and have private equity-style fund mathematics (no retail investor funds or crowdfunding platforms). Capital raised for debt strategies or vehicles focused on public investment are not included.

Stay tuned this week for PEI’s downloadable full-year fundraising report.

– Isobel Markham contributed to this report.