Private Equity’s Fund-Raising Gusher

Deal Journal - WSJ.com, November 8, 2007, 7:30 am
Private Equity’s Fund-Raising Gusher
Posted by Tennille Tracy
U.S. private-equity firms may not be doing a whole lot of deals these days, but that isn’t stopping them from raising more money.
PE firms have set a fund-raising record this year, pulling in a total of $263 billion, according to sister publication Private Equity Analyst, up from $258 billion raised last year. With nearly two months left in the year, there is a chance they could surpass $300 billion.
It might seem an odd time for private-equitiy firms to set a fund-raising record. After all, the debt markets have curbed new buyout activity. Buyout shops announced just $8.5 billion of new deals in October, roughly a fifth of the $42.2 billion a year earlier, according to Dealogic. Then, there are those pesky economists who lately have been warning of the possibility of recession, which would threaten the health of existing PE-backed companies.
Amid such a cloudy environment, Deal Journal can’t help but wonder: Just what would it take to shut off the fund-raising spigot? U.S. institutional investors are smitten with private-equity funds, while Chinese and Middle Eastern sovereign funds have started to pile on as well. They show no signs of stopping.
Is its possible that private-equity fund managers themselves might one day need to exercise some restraint and raise smaller funds? Perhaps, but we aren’t holding our breath.