The average time taken to raise a private equity fund out of those closed so far in 2014 has decreased to 16 months. This represents a significant dip from an average of 18 months seen over the previous two years, but doesn’t quite match up to the years of 2006 to 2008, when private equity funds took an average between the range of 11 to 14 months to reach a final close. Evidently, fundraising can be a time consuming process and as a result, many GPs utilize placement agents, calling on their services ranging from preparing marketing materials to actively seeking investor commitments.
The private equity fundraising market is at an all-time high with a record number of private equity funds in market. These 2,188 funds on the road are seeking an aggregate $737bn in capital commitments. Of the funds currently in market, 41% have appointed the services of placement agents to assist with fundraising. As of June 2014, Preqin’s Funds in Market online service shows that 46% of vehicles that completed fundraising so far this year enlisted placement agent services.
Of the private equity funds in market that predominantly focus on investments across North America, 41% have employed a placement agent to help raise capital commitments. For Europe-focused funds, 44% are using a placement agent and for Asia and Rest of World-focused vehicles, 37% of funds have recruited these service providers. By fund type, buyout funds and natural resources funds have the highest proportions of placement agent use, with 64% and 63% respectively.
Many first-time fund managers appoint placement agents to take advantage of the services they provide, including fund structuring, composing marketing materials and devising a strategy to successfully market the fund to investors. Preqin data on placement agent use by first-time managers shows that 33% of first-time managers currently raising a private equity fund are utilizing placement agent services. Forty-four percent of the first-time funds in market using a placement agent have successfully held at least one interim close, one percentage point up on first-time funds not utilizing a placement agent that have held at least one interim close.
Park Hill Group is helping to raise capital for the most funds currently on the fundraising trail, with a total of 22 funds having enlisted their services, representing a collective target of an aggregate $25bn. This is followed by Credit Suisse Private Fund Group, which is helping to raise 15 funds; both Eaton Partners and Greenhill & Co. working on 10 fundraises each. Credit Suisse Private Fund Group is aiming to raise a total of just under $18bn, whereas Eaton Partners and Greenhill & Co. are targeting $9bn and $5.5bn respectively.