Secondaries giants drive H1 fundraising to three-year high

Funds that closed on more than $5bn in H1 took on average 15 months to do so, longer than in any of the previous five years, according to PEI data.

Secondaries mega-funds helped drive private equity fundraising to a three-year high during the first half of this year despite the coronavirus crisis shutting down large parts of the global economy and restricting travel.

Funds closed on $241 billion between January and June, a marginal increase from $233.7 billion during the same period last year and the highest first-half total since 2017, according to PEI data.

Two secondaries vehicles tied for the largest fundraise of H1: Ardian raised $14 billion for Ardian Secondary Fund VIII in June, matching the sum Lexington Partners collected for Lexington Capital Partners IX in January.

Including the $5 billion it collected for its co-investment vehicle, Ardian’s $19 billion secondaries programme was the largest capital raise during the period.

Capital-raising has continued unabated into the second-half of the year – as soon as the calendar clicked into July, CVC Capital Partners, which had collected $4.5 billion for its Asia-Pacific V fund in the first half, held the final close on €22 billion for its latest flagship.

Still, some fundraising processes are likely to be delayed in 2020 as coronavirus disrupts global travel. GPs – both established and first-time funds – are bracing for a minimum of three to six months added to the final close date of any fundraise, Julian Pearson, co-founder of placement firm FirstPoint Equity, told Private Equity International.

Philippines-based Navegar, for example, closed its third fund six months later than planned in June after being unable to meet in person with potential investors.

Pearson added: “From our own experiences, LPs have demonstrated over these past couple of weeks that they can complete commitments via Skype and video conferencing, but they need to have several in-person meetings and touchpoints in prior months.”

Secondaries funds accounted for 15 percent of capital raised in H1 by dollar value and just 3 percent of the 356 funds closed by number. Buyout funds accounted for 37 percent of capital raised and 24 percent of funds closed.

Three Asia-Pacific funds were present in the top 10, with Korea’s MBK Partners and Hong Kong’s Baring Private Equity Asia each raising $6.5 billion for MBK Partners V and Baring Asia Private Equity Fund VII, respectively.

Asia-Pacific funds closed on $29.1 billion in the period, exceeding the $19.2 billion raised for Europe-focused vehicles. Multi-regional vehicles attracted $103.3 billion and North America funds $87.3 billion.

Funds that closed on more than $5 billion in H1 took an average of 15 months to reach a final close, longer than in any of the previous five years.

As of May, around one-third of general partners in market with a vehicle were planning to extend the process as a result of the pandemic, according to PEI’s Manager Outlook on 2020 in Light of Covid-19 survey. Nearly half (45 percent) of managers expected a delay to final close of more than three months.

Funds in market were targeting $765 billion as of 1 July, of which $356 billion will be focused on North America, $109.7 billion on Asia-Pacific and $91.1 billion on Europe.

– Carmela Mendoza contributed to this report.