Investor Appetite for Large to Mega Buyout Funds – February 2014

by Karun Ahluwalia

  • 26 Feb 2014
  • PE

At the end of 2013, Preqin’s data revealed that around half of all capital raised for private equity buyout funds that closed in 2013 went to large to mega buyout funds. This command of the market by the largest buyout funds is best exemplified by the final close of Apollo Investment Fund VIII in December 2013. The successful closing of the $18.4bn vehicle highlights not only the confidence of experienced fund managers in their fund target sizes, but also an active interest from LPs to commit to these fund types. A study carried out by Preqin at the end of 2013 found there to be a growth in investor appetite for large to mega buyout funds over the course of the year, with 26% of LPs looking to target the fund type in 2014. This is a slightly higher proportion than at the end of 2012, when 23% of LPs planned to target such vehicles in 2013.

The healthy levels of investor appetite for large to mega buyout funds are evident in the fundraising statistics for 2014 YTD, for instance with the recent final close of Golder Thoma Cressey Rauner XI. This is the largest fund that has closed so far this year, at $3.85bn. Washington State Investment Board, which made an investment of $35mn, and Minnesota State Board of Investment, which committed $20mn, are a few examples of LPs that pledged capital to this fund. Golder Thoma Cressey Rauner XI is a North America-focused vehicle, seeking investments in business service, consumer, healthcare and technology companies, including start-ups. 

Preqin’s Investor Intelligence online service currently tracks 5,248 investors in private equity funds, with over a fifth (21%) of LPs known to have previously made commitments to large or mega buyout funds. Over half of the investors (52%) tracked by Investor Intelligence have expressed an appetite for investing in buyout funds, and of these, 57% are investors based in North America, 27% in Europe, and the remaining 16% are LPs headquartered in Asia and other economies outside of North America and Europe.

Further to this, 15% of respondents to Preqin’s recent investor survey believe that large to mega buyout funds present the best opportunities out of all private equity fund types in the current market. It is apparent that investor appetite for large to mega buyout funds has grown over the last 12 months, and is likely to continue to do so throughout 2014, which is reassuring news for fund managers looking to raise LP capital for such vehicles in the year ahead.

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