Private equity fund raising continues momentum

The research firm, which tracks alternative assets, said private equity fundraising is on track to match the amount of capital raised in 2013 ($531bn), as it expects the 2014 fundraising figure to increase by 10-20% once more information becomes available.

“Investor appetite for private equity remained strong throughout 2014, with the amount of capital raised by fund managers on a par with the last couple of years,” said Christopher Elvin, head of private equity products.

“The stumbling block, however, has been the number of managers able to hold a final close, with this being at the lowest level since 2010. It is evident that the private equity fundraising market is still in a state of bifurcation.

“The largest, brand-name managers are receiving the majority of investor commitments, with smaller managers – particularly first-time funds – finding it difficult to raise capital.”

Top fundraisers

The largest private equity funds to hold a final close in 2014 were all US-focused with Hellman & Friedman VIII ($10.9bn) taking the lead, followed by Centerbridge Capital Partners III ($6bn) and Vista Equity Partners Fund ($5.8bn).

Blackstone Real Estate Partners Asia, which attracted $5bn, also features in this list, securing the sixth position.

In terms of geographic split of private equity funds that closed during October-December, North American funds dominated the quarter with 117 funds garnering $81.9bn capital followed by Europe with 49 vehicles raising $23.8bn.

Funds with an Asia focus attracted $11.2bn across 20 vehicles, but nearly half is accounted for by the Blackstone fund mentioned earlier. 

One of the positives for the year was the falling average time on the fundraising trail and the significant proportion of managers that are closing at or above target. 

In terms of fund raising targets, 52% of funds globally that closed in 2014 exceeded their target, while a further 17% met their target.

In 2013, 47% of funds that closed exceeded their target.

Competition for capital

According to Preqin, investor sentiment towards the asset class remains very positive, with almost half of investors surveyed in December expecting to make their next private equity fund commitment in the first half of 2015.

However, Preqin warned managers might face difficulties during the current year due to a competitive fundraising scenario.

“Given that the fundraising market is still so competitive, with a record 2,252 funds on the road seeking capital, it is likely that managers may continue to struggle to hold a final close in the coming year,” the firm said.

The firm added that private euqity firms are targeting an aggregate $800bn, the highest since January 2009.