Blog

2016 Round-up: Private Equity & Venture Capital Fundraising Reaches Post-Crisis High

by Simon Li

  • 07 Mar 2017
  • PE
  • VC

The 2017 Preqin Global Private Equity & Venture Capital Report highlighted the strong fundraising year seen in the private equity industry in 2016 and predicted that (as more data became available) 2016 would witness the greatest amount of capital raised since the Global Financial Crisis. The latest data from Preqin’s Private Equity Online platform shows that an aggregate $369bn was raised by 895 private equity funds in 2016, as shown in the chart below. This amount of capital represents the highest level since 2008, a 12% increase from 2015 and the fourth consecutive year in which fundraising has surpassed $300bn. Here, we provide an overview of the private equity fundraising landscape of 2016, a year which saw notable fund closures such as Advent International’s Advent Global Private Equity VIII ($13bn) and the largest secondaries fund ever raised, Ardian’s ASF VII ($10.8bn).

Capital Concentration

As seen in the chart above, 2016 witnessed fewer private equity funds reaching a final close than in recent years. Accordingly, the average size of funds closed in 2016 reached an all-time high of $466mn, surpassing the previous record of $444mn in 2010 and increasing 17% from 2015. This is likely due to the continuing trend of LPs investing more capital with a smaller number of established GPs: the 20 largest funds closed in 2016 account for 37% of aggregate capital raised in the year, an increased proportion from that of 2010 (32%) and 2015 (34%).

2016 Fundraising by Fund Type

  • Buyout vehicles secured the majority (58%) of aggregate capital raised in 2016.
  • Venture capital funds secured 15% of total capital, followed by secondaries and growth funds, each accounting for 7%.
  • There was a 9% decrease in the number of buyout funds that reached a final close in 2016 (193); nevertheless, fundraising totalled $213bn, which represents a 34% increase from 2015 ($160bn).
  • Similarly, there was an 8% decrease in the number of venture capital funds closed in 2016 (411), while fundraising remained steady with an aggregate $57bn raised compared to $56bn in 2015.
  • In a contrasting trend, the average size of growth funds decreased from $426mn in 2015 to $304mn in 2016 as a similar number of vehicles raised 22% less capital over the course of 2016.

Fundraising by Region

North America continues to attract the most investment in the private equity industry: funds focused on this region raised $202bn in 2016. While this is a 6% increase from 2015, the proportion of global annual capital raised by North America-focused funds decreased from 58% in 2015 to 55% in 2016.

In a contrasting trend, Europe-focused funds account for 32% of all capital raised in 2016, a significant increase from 22% in 2015. Despite a turbulent year headlined by the Brexit referendum, the Italian referendum on constitutional reform and general slow economic growth, there has been a noticeable surge in Europe-focused capital, with $116bn raised in 2016, a 60% increase on the $73bn secured in the previous year. This figure also represents the greatest level of Europe-focused capital raised since 2008 ($115bn). Regions outside North America and Europe, however, witnessed a slowdown in fundraising activity during 2016, with Latin America-, Australasia- and Asia-focused funds securing 34%, 27% and 21% less capital respectively in 2016 than in 2015.

Outlook

2016 has been another year of strong fundraising for the private equity industry. Despite the many unknowns stemming from the US presidential election, the impact of the Brexit referendum and continued slow growth of the global economy, the industry continues to attract capital from investors seeking diversification and superior returns. Furthermore, with Preqin’s Private Equity Online currently tracking a record 1,884 private equity funds in market, collectively targeting $636bn, the industry could witness another successful year of fundraising in 2017.

Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights