Q1 fundraising shows strong start to year with covid-19 blow to come

Total private equity capital raised in the period is the second-highest in first quarter fundraising since 2015.

Private equity fundraising in the first quarter of 2020 was the second highest quarterly total since 2015 and 30 percent larger on a year-on-year basis, preliminary PEI data show.

A total of $124 billion was raised by 184 funds, almost in line with the first quarter average figures in the last five years.

The covid-19 crisis is expected to deal a blow to fundraising in the coming months. One in five investors intends to make fewer private equity fund commitments in 2020 compared with their plan for the year as a direct result of the pandemic, according to a survey conducted by Private Equity International with close to 80 LPs at the end of March. In addition, 12 percent of respondents said they will reduce their planned average size of commitment.

The inability to perform in-person due diligence due to travel restrictions will also be a major setback to fundraising for all managers and most fundraising timelines will be pushed out by at least three months, according to placement agents PEI spoke to last month.

First-time managers, especially those that are yet to hold in-person meetings with LPs, are being forced to postpone capital-raising plans.

“We are frankly saying to GPs which have yet to kick off initial roadshows, ‘Look, there’s no way of coming out right now,’” Julian Pearson, co-founder of placement firm FirstPoint Equity, said.

Lexington Partners’ $14 billion haul for its ninth secondaries vehicle is the largest fund raised during the quarter, more than double the next largest fund, Baring Private Equity’s Asia’s seventh vehicle, which gathered $6.5 billion.

Notable among the 10 largest funds in the quarter is the diversity of strategies and geographies. Two Asia-focused funds raised a total of $11 billion – Baring Asia Private Equity Fund VII and CVC Capital Partners Asia Pacific V. Meanwhile Tiger Global Management collected $3.75 billion for its 12th growth equity-focused vehicle that will invest globally. Energy focused firms ArcLight Capital Partners and Energy Capital Partners also held final closes for their main flagship funds, raising $3.4 billion and $3.3 billion, respectively.

Energy Capital Partners also raised more than its main flagship – $3.5 billion – via a co-investment vehicle that will invest alongside the fund.

North America-focused funds made up almost half of aggregate capital raised for the quarter, while multi-regional and Asia-Pacific funds comprised 40 percent and 13 percent, respectively.

In terms of strategy, LP appetite for buyouts and growth equity remained consistent as in previous years. Buyout funds accounted for 40 percent, or $49 billion, of total capital raised, while growth funds made up around 17 percent, or $21 billion.