A dozen private equity funds of funds held a final close in the first three months of 2011, raising a total of $2.5 billion. This is a similar level of fundraising as the same period last year when an identical number of vehicles closed having secured aggregate commitments of $3 billion. It is down on the level of activity in the fourth quarter of 2010, however, which saw 17 funds of funds close on $4.6 billion.
The capital raised by Portfolio Advisors represents a significant proportion of the total amount secured in the first quarter of this year. The Connecticut-based manager closed the sixth vehicle in its core fund of funds series at the end of March with commitments totalling $1.1 billion. Portfolio Advisors Private Equity Fund VI (PAPEF VI) has a broad scope, targeting various types of private equity funds investing around the world. Over 80% of the commitments to the vehicle came from limited partners that have invested with Portfolio Advisors on at least one occasion in the past, with public and private sector pension funds, endowments, foundations, insurance companies, family offices and high net worth individuals included in the vehicle’s investor pool. Preqin’s data shows that PAPEF VI is the third largest fund of funds to reach a final close in the last 12 months.
The amount of capital secured by private equity funds of funds varies considerably and is largely dependent on the investment strategies employed by managers, with many purposely setting relatively small fundraising targets. In general, however, the size of funds of funds has declined year-on-year since 2007, when the average vehicle closed on commitments totalling $377 million. A modest drop (7%) in the average size of funds of funds was seen in 2008, while the decline on the 2007 peak had reached 19% by 2009 and 28% by 2010. To date, the average fund of funds closing in 2011 is 44% smaller than the average fund of funds that closed in 2007.