First-time funds constitute a niche area within the private equity industry that has always been looked upon as riskier than investing with more experienced fund managers. The slow economic climate has increased investor caution when investing in private equity and has thus done little to help maiden funds seeking capital.
As of June 2012, there were 524 first-time funds on the fundraising trail. Collectively, these vehicles are targeting $126.3bn from investors and have an average target size of $259mn. The aggregate and average target sizes of the funds in market from more experienced PE firms currently seeking capital are significantly higher: $688.5bn and $554mn respectively. This is unsurprising as more experienced fund managers, with demonstrable track records, can often increase the amount they raise for successor vehicles.
In terms of the geographic focus for first-time funds in market, Asia and Rest of the World regions are most popular, followed by North America, then Europe. Despite this, however, the average target size of the funds is greatest for vehicles primarily targeting Europe, with a mean target of $318mn. For Asia and Rest of the World-focused first-time funds, the average target size is $250mn, while for North American-focused vehicles it is $227mn.
The top three first-time funds currently in market by largest target size are Harbourmaster Infrastructure Debt Fund, Marguerite Fund and Aviva Investors Hadrian Capital Fund I, which are all infrastructure vehicles. The Harbourmaster Infrastructure Debt Fund, managed by Harbourmaster Capital Management, is the largest of all with a target size of €2bn. The vehicle is dedicated to financing European infrastructure assets and maintains a focus on senior debt investments, as opposed to mezzanine or subordinated debt.
For a more detailed insight into the first-time fund managers, particularly with regards to their fundraising trail and the obstacles they face along the way, including LP sentiment and a discussion on spin-off vehicles, please read the June edition of our free Private Equity Spotlight newsletter.