Buyout Fundraising Experiences Drop-Off – November 2015

by Bradley McEwan

  • 04 Nov 2015
  • PE

Buyout fundraising experienced a resurgence in the amount capital raised over 2013 and 2014, with $191bn and $185bn collected through final closes respectively. However, buyout fundraising in 2015 YTD has been subdued, with just $106bn raised as we approach the end of 2015 by 126 buyout funds, averaging just over $920mn per fund and shy of the average buyout fund size in 2014 of just over $1bn.

As the chart above shows, aggregate capital raised by mega funds has decreased dramatically since 2014, during which $53.3bn was raised. In contrast, 2015 YTD has seen just $17.7bn raised via mega buyout funds. The largest of which to hold a final close this year is EQT VII, managed by Sweden-based private equity firm EQT, reaching its target of just under €6.8bn. Following its predecessor fund, the vehicle focuses on deploying capital in a range of sectors operating in the Nordic region and German-speaking Europe.

The largest buyout fund in market based on targeted capital is Blackstone Capital Partners VII. Launched in Q4 2014, the fund is targeting $17.5bn in capital commitments and focuses on making control and control-oriented private equity investments on a global scale. The fund operates a thematic, sector-based approach to investing, with a focus on building its portfolio companies through continual investment and operational improvements. The vehicle has yet to formally hold a final close, although it has been reported that the fund has raised its target amount.

Another key trend displayed in the chart above is the increased proportion of capital raised by large buyout funds. Between 2013 and 2014, the proportion grew from 24% of total buyout capital raised to 42%. So far, 2015 has seen 43% of buyout capital raised by funds closed between $1.5bn and $4.5bn in size.

Over recent years, Preqin surveys of investors’ intentions showed that small and mid-market buyout funds were the fund type mostly commonly perceived as presenting the best investment opportunities. However, fundraising statistics show that in bumper years for buyout fundraising, mid-market fundraising in particular remains relatively consistent, with large and mega funds accounting for the bulk of capital in the better years.

*Buyout Fund Size ranges: Vintage 2005-2015, Small Buyout ≤$500mn, Mid-Market Buyout between $500mn and $1.5bn, Large Buyout between $1.5bn and 4.5bn, Mega Buyout > $4.5bn.

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