Thursday, October 11, 2007

Private Equity Is on Pace for Record Fund-Raising Year

Posted by Deal Journal on
Keenan Skelly of Dow Jones Newsletters files this report on fund-raising by private-equity firms.
While trouble in the credit markets led to a pronounced slowdown in buyout deal-making in the third quarter, no corresponding decline has been seen in fund-raising.
Through the third quarter of this year, $199.4 billion has been raised by 295 U.S. private-equity firms, well ahead of the $154.1 billion collected by 232 firms in the year-earlier period, according to data collected by Private Equity Analyst, an industry newsletter published by Dow Jones & Co. The figure is $60 billion ahead of where the industry was at the midpoint of the year.
The data encompass funds raised by buyout, venture capital, and other types of private-equity firms.
With such firms as Apollo Management, the Carlyle Group and Warburg Pincus still in the market raising funds of $10 billion or more each, the tally looks likely to continue rising rapidly through year end, meaning U.S. fund-raising could well break 2006’s record total of $254 billion.
The continued strength is in part a reflection of the fact that it takes time for limited partners and general partners alike to adjust to new circumstances in their markets. It also is driven by the recognition by many LPs that private equity is a long-term investment, and that consistently committing capital to the asset class over time – and not just when market conditions are good – is likely the best way to generate strong returns.
The buyout category continues to dominate, with 132 buyout funds raising $155 billion this year, up from $100.7 billion raised by 96 shops at this point in 2006. Strong fund-raising by firms looking to take advantage of distressed opportunities is a big part of the 2007 picture, with such funds accounting for $29.6 billion of the total raised this year. Distressed firms had already raised a record sum by July of this year.
On the venture-capital side, fund-raising continues to be sluggish. A total of 102 U.S. venture firms have raised $18.8 billion this year, down from $21.3 billion raised by 89 firms in the year-ago period.
In Europe as in the U.S., fund-raising totals remain on track for a record. Through the first nine months of the year, 116 European private equity firms raised a total of $73.1 billion, ahead of the $68.6 billion that 114 funds had raised at this point in 2006. The record for Europe of $100.8 billion was set last year.

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