Private Equity Fundraising Shows Signs of Recovery: $76 Billion Raised in Q2 2009

by Tim Friedman

  • 06 Jul 2009
  • PE

Q2 2009 represents a significant improvement from Q1 2009, with a total of 82 private equity funds raising an aggregate $76.2 billion, a 28% increase on the $59.6 billion raised in Q1 2009. However, this is still short of the levels of fundraising experienced over recent years, and represents a return to levels last seen in 2005.

The number and aggregate target value of private equity funds on the road have dropped significantly, down nearly 10% in terms of value between the start of Q2 2009 and the start of Q3 2009. This is evidence that there are significantly fewer new private equity funds being launched, and that other managers are lowering their targets, with some managers abandoning their fundraising ambitions altogether. In 2009 to date there have been 30 confirmed cases of funds being abandoned, already matching the 30 that were abandoned in the whole of 2008 and more than doubling the 14 shelved funds in 2007.

The increase in capital raised indicates that investor appetite for new investments is increasing. In conjunction with the drop in number of funds in market, this will go some way to improve conditions for fund managers with private equity funds currently raising. However, conditions do remain extremely competitive, and fund managers should expect the fundraising process to take more time than it has done in previous years. The average time taken to close private equity funds closed in 2009 stands at 18.3 months, which represents a significant increase in comparison with the last few years.

Buyout funds raised the most capital in Q2 2009, with a total of 18 funds raising an aggregate $33.9 billion. Natural resources funds raised $9.9 billion (largely down to the closing of the $9 billion First Reserve Fund XII), while fund of funds and secondary fund of funds both had a good quarter, raising $7.7 billion and $8.4 billion respectively. Real estate funds raised a total of $8.9 billion, while venture capital funds accumulated a total of $4.7 billion worldwide in final closings.

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