Private equity funds closed in Q2 2014 on average have taken the shortest amount of time to reach a final close since 2008, standing at an average of 15 months on the road for funds closed in Q2 2014, and 14 months for those closed in 2008, as shown in July’s edition of Preqin Private Equity Spotlight. In addition to this, a significant 53% of private equity funds closed so far in 2014 have done so above target, and a further 16% of funds have closed this year having met the level of capital targeted. This represents a slight improvement on 2013, in which 48% of funds closed above target and 16% met target.
In addition to increased levels of aggregate capital raised each year since 2011, the above statistics demonstrate that conditions in the private equity industry have improved significantly since the market dip caused by the onset of the 2008 financial crisis. During the majority of these years, funds took an average of 18 months to reach a final close and a large proportion closed below target. An example of which is 2009, when 69% of funds closed having failed to meet their target.
Examining the proportion of funds closed above target so far in 2014 by primary regional focus, it can be seen that vehicles focused on Europe have been the most successful in surpassing levels of capital targeted (66%). In contrast, only 41% of funds investing outside of the regions of North America, Europe and Asia managed to exceed the level of capital targeted. In the year to date, 51% of funds focused on either Asia or North America have closed above target.
Ardian Secondary Fund VI is one of a number of funds that closed having surpassed its target for capital commitments so far in 2014. The global secondaries fund collected $9bn in capital commitments, closing $2bn above target. This makes Ardian Secondary Fund VI the private equity fund with the largest difference between target and final close size, in terms of absolute amount of capital. Having spent only eight months on the road, Energy Capital Partners III is another notable fund that surpassed its target; the infrastructure vehicle originally aimed to accumulate $3.5bn in capital commitments but went on to hold a final close on $5.1bn. The fund invests in North American energy infrastructure, including power generation, renewables, electric transmission and midstream gas sectors. It also focuses on late stage development and operating assets and invests in holding companies for investments in energy projects.
There are currently 2,180 private equity funds in market, 930 (43%) of which have held at least one interim close. Preqin’s Fundraising Momentum tool shows that the average time to first close for these funds in market currently stands at just seven months. Furthermore, an average of 38% of targeted capital has been raised in commitments at time of first close.