In a previous post, we analyzed a steady recovery in the number and aggregate value of first-time funds in the US private equity middle market, yielding the conclusion that in light of the slower pace of such pools raised in 1Q, there’s potentially a somewhat slackened appetite for exposure to that competitive playing field.
That said, it’s still important to highlight one important piece of the overall backdrop to middle-market fundraising: Just how large a portion of overall US PE fundraising it now constitutes. As the chart above highlights, middle-market-dedicated funds—vehicles sized from $1 billion to $5 billion—made up 70% of overall US PE raises in the first quarter of 2017, the highest tally of the decade. Capital committed is a different story, yet still hefty at 63%.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
What those figures taken in tandem further underline is the popularity of the US middle market as a destination for PE capital allocation. That has engendered growing competition, which in turn impacted fledgling fundraises. Going forward, however, the necessity for continued exposure to the bulk of US middle-market enterprises will still be necessary for many PE players, especially as public equities remain priced aggressively and general M&A valuations stay high.
Note: This column was previously published in The Lead Left.
For more data and analysis, be sure to download our free 1Q US PE Middle Market Report!
Article by Garrett James Black, PitchBook