Competition between general partners remains fierce as many fund managers struggle to secure the commitments required to achieve their private equity funds’ initial fundraising targets. Consequently, the market is witnessing private equity funds spending increasing amounts of time on the road.
The average time spent on the road for funds closed to date in 2009 is 18 months, up from 15 months for funds that closed in 2008, and 12 months for funds that closed in 2007. Nonetheless, the spread of time spent on the road for funds that achieved a close in 2009 to date is wide, with a small number of funds completing fundraising inside two months, and others having been on the road for more than two years.
Of funds that completed a final close in 2009 to date, 9% completed fundraising within 6 months of their fundraising launch, while 20% of funds closed in 2009 to date completed fundraising within 12 months, significantly down from 39% of funds closed in 2008. Furthermore, the statistics confirm that it is becoming more commonplace for funds to take at least a year to complete fundraising, and in many circumstances much longer. 41% of funds closed in 2009 to date managed to do so 13 to 18 months after the fundraising launch, up from 31% for the same time period in 2008. Following on, 20% of 2009 fund closures completed fundraising after 19 to 24 months on the road, and 19% closed more than 25 months after fundraising commenced. These figures compare with 19% and 11% for funds closed in 2008, and 10% and 5% for funds closed in 2007, respectively.
We can further dissect the data to reveal the differences in time spent on the road between buyout and venture funds that have closed to date in 2009. Buyout funds that achieved a final close in 2009 have spent an average of 17 months fundraising compared with 19 months for venture funds. There are few examples of either fund type having achieved a final close in 2009 within a year of the fundraising launch, with 21% of buyout funds and 19% of venture accomplishing this. However, 63% of buyout funds that reached final close in 2009 did so within 13 to 24 months of the fundraising launch, compared with 48% of venture funds. 33% of venture funds compared with 17% of buyout have taken over two years to reach a 2009 final close, which suggests that venture funds are having more difficultly than buyout funds in the current fundraising environment.
For more information on private equity fundraising, please see Preqin’s Funds in Market product.