According to Preqin, 977 private equity funds held a final close throughout the year raising a total of $486bn, higher than any annual amount between 2009 and 2012, and on track to match the 2013 total.
The private equity fundraising market in 2014 has seen a total of $486bn in capital commitments spread between the lowest number of funds in any year since 2009. The amount of capital raised is on track to match the amount of capital raised in 2013 ($531bn), as Preqin expects the 2014 fundraising figure to increase by 10-20% as more information becomes available. For the funds that did close, however, the average time to reach a final close has fallen by two months; funds that closed in 2014 took an average of 16 months, compared to 18 months on the road for funds closed in 2013. 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.
Other Key Private Equity Fundraising Facts:
- Fundraising Success: 52% of funds closed in 2014 exceeded their fundraising target, while a further 17% met their fundraising target. This compares to 47% of closed in 2013 funds which exceeded their target.
- Interim Closes: On top of the $486bn raised in 2014 by funds holding final closes, a further $103bn was raised through 482 private equity funds holding interim closes throughout the year.
- First-Time Funds: First-time funds closed in 2014 accounted for 7% of total capital secured by funds over the year, the same proportion as in 2013.
- Fundraising by Region: 525 North America-focused funds held a final close in 2014 securing an aggregate $282bn, down from 634 funds that secured $332bn in 2013. Europe-focused fundraising saw a slight increase, with funds focused on the region securing $129bn in 2014 compared to $122bn in 2013.
- Largest Funds: The largest fund to close in 2014 was buyout fund Hellman & Friedman VIII, which held a final close on $10.9bn.
- Funds in Market: A record 2,252 private equity funds are currently in market seeking an aggregate $800bn, the highest aggregate target since January 2009.
- Dry Powder: Dry powder for all private equity funds stands at an all-time high of $1.2tn, up from $1.1tn in January 2014. Dry powder solely for buyout funds is at $449bn, up from $400bn as of the start of 2014.
“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. 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.
Two positives to come out of 2014, however, are the falling average time on the road and the significant proportion of managers that are closing at or above target. Furthermore, investor sentiment towards the asset class remains very positive, and almost half of investors surveyed by Preqin in December expect to make their next private equity fund commitment in the first half of 2015.”
Christopher Elvin – Head of Private Equity Products, Preqin