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With $1 Trillion on Hand, Private Equity Set to Deal
Private-equity firms have more than $1 trillion available for deal making this year after the industry achieved the second-highest level of fund raising on record last year. Private-equity firms held final closes for 768 funds last year, raising $554 billion, according to research group Preqin. The new funds raised supplemented the uninvested capital available from earlier vehicles, bringing overall firepower to $1.02 trillion, according to Preqin. Buyout funds account for the biggest chunk of that figure, with $472 billion in available capital. The two main other private-equity fund types are venture capital and real estate. Although private-equity firms are likely to suffer through the investments they made at the height of the market in 2006-2007, they expect to be able to secure strong returns on investments made during the economic downturn, so they have been keen to raise funds and are waiting for prices of potential targets to bottom out. Some firms have struggled to raise large funds, however, as investors are becoming nervous about committing additional capital to the asset class. Much of the capital available to the private-equity sector is concentrated in funds controlled by the 10 largest buyout firms; they have $197 billion in uncalled capital available, according to Preqin, equivalent to 19% of the global total across all fund types. The figures relate to cash pledges from investors. This could cause private-equity firms some problems if investors that have overcommitted at the height of the market are unable to honor commitments. The total amount of capital raised last year was the second-highest amount on record, behind the $625 billion raised in 2007 and ahead of the $525 billion raised in 2006. Buyout funds raised the most capital, with $216 billion of the total, although venture funds were the most numerous, with 217 funds compared with 170 buyout vehicles. Firms raised 166 real-estate funds valued at $116.8 billion, the second-largest total. In geographic terms, the U.S. topped global fund-raising activity. U.S. groups raised 390 funds valued at a combined $318.1 billion, compared with 203 valued at $143.6 billion in Europe and 175 valued at $92.2 billion in Asia and the rest of the world. Despite a difficult fund-raising environment with some investors seeking to rein in allocations to the asset class or renegotiate existing commitments, the pipeline of forthcoming funds looks strong. There are 1,684 targeting a combined $888 billion in commitments as of January, Preqin said. Fund raising did slow over the course of the year, the research showed, with $97.6 billion raised in the fourth quarter compared with $159.6 billion in the first period. |
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