Private Capital Fundraising Exceeds Half A Trillion Dollars For Third Consecutive Year by Preqin
The private capital industry has grown and changed immensely since Preqin first began tracking it in 2003. The diversity of fund strategies has grown as managers and LPs target new areas to generate alpha; sectors such as private debt, infrastructure and natural resources, all once considered subsets of private equity, have grown and evolved into discrete asset classes. Meanwhile, industry terminology has struggled to keep pace, and ‘private equity’ has come to have interpretations as varied as buyout funds specifically, or closed-end private funds generally.
From the beginning of 2016, Preqin will be updating its terminology to better reflect the growing diversity of the industry. Preqin reports and press releases will henceforth use the following terms:
- ‘Private Equity’ will refer to the core asset class centered on the buyout and venture capital industry, together with other closely related strategies.
- ‘Private Capital’ will refer to the broader spectrum of private closed-end funds, including private equity, private debt, private real estate, infrastructure and natural resources.
The table below indicates the fund types Preqin considers as constituting each asset class.
We hope this distinction between core private equity and broader private capital will be helpful for our customers and will enable us to continue to deliver the clear and concise data and market insight for which Preqin is known.
Private Capital: Fundraising Exceeds Half a Trillion Dollars for Third Consecutive Year
2015 marked another strong year for private capital fundraising, as 1,061 funds closed securing a combined $550bn in investor commitments. Preqin expects these totals to rise by 10-20% as more information becomes available, so aggregate fundraising in 2015 looks set to equal or surpass the $590bn raised in 2014. This would represent the fifth consecutive year in which aggregate private capital fundraising has increased.
Fundraising looks set to remain competitive in 2016, with an increasing number of funds being marketed to investors. The number of funds in market has risen across 2015, and at the start of 2016 stands at 2,651. These funds are targeting an aggregate $946bn, surpassing the previous record seen at the start of 2009, when private capital funds in market were seeking a combined $888bn in investor commitments.
- Fund Numbers: Despite strong fundraising, the 1,061 funds closed in 2015 is 24% fewer than the 1,395 funds closed in 2014, and looks unlikely to match that total as new information becomes available.
- Regional Fundraising: North America-focused funds increased their prominence in the private capital industry in 2015, accounting for 60% of total capital raised, up from 56% in 2014.
- Biggest Funds: Blackstone Capital Partners VII, which closed in Q4 on $18bn, is the biggest private capital fund closed in 2015 and the fi fth largest buyout fund ever.
“The private capital industry has continued its strong fundraising activity in 2015, and looks set to match or exceed the aggregate capital raised in 2014. This would mark the fi fth year of growth, as the industry continues the expansion seen in the period following the Global Financial Crisis.
Despite fewer funds closing in 2015 than in previous years, the fundraising market has become more competitive over the course of the year, with a record number of funds seeking capital commitments. The challenge for investors this year will be finding the right investment opportunity in a crowded marketplace.”
Mark O’Hare, Chief Executive
Private Equity: Fundraising Slows in 2015 as Global Dry Powder Hits Record Levels
Global private equity fundraising slowed in 2015, with the annual total capital raised decreasing for the first time in five years; 687 funds closed raising a combined $287bn, down from the $339bn raised in 20141. However, the fundraising environment remains healthy, particularly in developed markets. North America is the driving force behind fundraising, with funds focused on the region accounting for 60% ($168bn) of total investor commitments in 2015.
The level of unspent capital (dry powder) available to private equity fund managers increased through 2015 to reach $752bn at the end of the year, up from $695bn at the end of 2014. This is the third consecutive annual increase in dry powder levels from the $565bn recorded at the end of 2012, as firms struggle to effectively deploy capital in a competitive and liquid deal market.
- Funds in Market: At the start of 2016, there are a record 1,630 private equity funds on the road, targeting an aggregate $488bn. This surpasses the previous peak of $482bn being sought at the start of 2008 by just 974 funds.
- Average Time on the Road: Private equity funds closed in 2015 spent an average of 15.7 months being marketed to investors. Although this is the same as in 2014, it is less than the average of 19 months that funds closed in 2013 spent on the road.
- Venture Capital Growth: Raising an aggregate $48bn, venture capital funds neared a record fundraising year in 2015, just down from $51bn in 2014 and $53bn in 2008. This has largely been driven by the North American market, raising 70% ($35bn) of global capital in 2015.
“2015 has presented a slower-paced private equity fundraising market, as firms struggled to maintain the level of new investor commitments from 2014. Moreover, record levels of dry powder suggest that fund managers are finding it increasingly challenging to effectively deploy capital into attractive opportunities.
Fundraising looks set to remain healthy going into 2016, with both the number of funds on the road and their total capital targets approaching record levels. However, fund managers may fi nd investor appetite starting to wane if their capital does not start being put to work in the coming year.”
Christopher Elvin, Head of Private Equity Products
Real Estate: Fundraising Set for Fifth Successive Annual Increase
Closed-end private real estate funds raised a combined $107bn in 2015, just below the $111bn raised the previous year1. Given that Preqin expects these fi gures to rise 10-20% as new data becomes available, 2015 looks set to be the biggest fundraising year since the Global Financial Crisis. Opportunistic and value added funds drove fundraising, securing $54bn and $22bn respectively in investor commitments. However, private real estate debt funds suffered a dip in fundraising levels, securing $14bn through the year. This represents a decline of 43% from 2014, when real estate debt funds raised a record $25bn.
2015 also saw dry powder hit record levels to stand at $252bn at the end of the year, reflecting both the strong fundraising market of recent years and the challenges fund managers face putting capital to work, a result of the levels of competition and high pricing in many real estate markets globally. With 492 funds currently in market seeking a combined $174bn, the market remains competitive for firms marketing new offerings. Investor demand for real estate exposure remains considerable however, and the strong fundraising seen in 2015 looks set to continue in 2016
- Regional Fundraising: North America dominated the real estate fundraising landscape in 2015, raising $71bn with 100 funds closed focusing on the region. Europe-focused funds raised $23bn, and Asia-focused funds