Through the first half of the year, mega-funds of $10 billion or more have made a strong comeback in the US and Europe. Five such private equity funds have already closed in 2017, matching the highest yearly total since 2008. The aggregate amount raised between those five funds came in just under $68 billion combined, and this year’s list doesn’t even include Apollo Global Management’s record haul of $23.5 billion, which has yet to hold an official close.
Of the five $10 billion+ funds raised this year, four of them held final closes in the second quarter, including CVC Capital Partners (€16 billion in June), Vista Equity Partners ($11 billion in May) and Silver Lake and CD&R both closing funds in April at $15 billion and $10 billion, respectively. About $54 billion in total, those four PE funds help explain the quarterly spike in global PE fundraising, which popped 41% QoQ to $106.2 billion.
In December, a strong performance helped Carlson Capital's Double Black Diamond fund achieve a double-digit return in 2021. Q4 2021 hedge fund letters, conferences and more Double-Digit Return According to a copy of the latest investor update, which ValueWalk has been able to review, Clint Carlson's Double Black Diamond fund returned 2.9% in December and Read More
Here's a look at how those mega-funds are bolstering this year's fundraising totals in the US:
The new funds are renewing the old conversation around return expectations for the funds’ backers. Howard Marks of Oaktree, for one, believes “private equity has been knighted” by LPs looking for “high returns in a low-return world,” adding that investors have warmed to the risks of PE given muted returns in equities and fixed income.
An analyst at Reuters agreed but added that the Leon Blacks of the world, like the proverbial hikers who encounter a bear in the woods, "only need to outrun their peers, not the bear." If that turns out to be true, that might prove to be a big difference between today’s string of blockbusters and the last wave of mega-funds raised 10 years ago, which had to race against several bulls.
Note: This column was previously published in The Lead Left.
For more data and analysis on the fundraising scene, download our 2Q 2017 US PE Breakdown.
Article by Alex Lykken, PitchBook