Between 2004 and 2013 YTD, 7,678 private equity funds have held a final close, raising an aggregate of $3.8tn in capital commitments. Thirteen percent of these closed funds were private equity funds of funds, which contributed a significant amount towards the asset class’ successful fundraising, having secured $269bn (7%) in total capital commitments.
Preqin’s Funds in Market shows that the number of funds of funds holding final closes fluctuated significantly over the course of 2004 to 2013 YTD. The lowest amount of capital was raised by funds that held a final close in 2004, with just 77 private equity funds of funds holding final closes in this period and raising $21bn. Fundraising reached its peak in 2007, with 164 private equity fund of funds vehicles holding final closes on an aggregate $58bn. In January of 2007, HarbourVest International V Partnership, the third largest fund of funds vehicle ever to be raised, held a final close on $3.1bn. The fund has a 2005 vintage and focuses primarily on buyout and venture opportunities in Europe.
Following the successful fundraises in 2007, there was a notable drop in the number of funds of funds closing and amount of capital being raised in 2008, 2009 and 2010, with 148, 111, and 78 private equity funds of funds reaching a final close respectively. Following the financial crisis, it proved harder for fund of funds managers to secure commitments from investors in a more fragile economy.
However, there has still been a significant level of capital raised by funds of funds between 2011 and 2013 YTD, with 84, 88, and 42 private equity funds of funds reaching final closes respectively and raising an aggregate $43.3bn. Despite various regulations, restrictions, and repairing economies affecting financial markets globally, it is clear that there continues to be an interest in private equity fund of funds vehicles. Less experienced and smaller investors in particular still recognize the benefits of diversification, relatively small commitment sizes and exposure to a specific funds or markets that funds of funds bring.