U.S. private equity fund-raising slipped in the third quarter, raising concern that fund-raising is starting to lose momentum. Thanks to a strong start to the year, however, fund-raising is still on pace to top the $95.9 billion raised in 2010. According to Dow Jones LP Source, 110 U.S. private equity funds raised $24.8 billion in the third quarter, accounting for 27% of the $92.5 billion raised during the first nine months.
"Private equity fund-raising appeared to be on a steady flight back to the land of recovery during the first half of 2011," said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. "But recent public market volatility, concerns about Europe and a heightened sense of economic uncertainty created some turbulence in the third quarter. The pilot has now turned on the 'fasten seatbelt' sign and it's still not clear whether the industry will get back to its regular cruising altitude in the fourth quarter."
In Europe, capital committed to private equity funds has already exceeded the 2010 total. Driven by a significant uptick in buyout fund-raising, 92 European funds raised $36.8 billion through the first three quarters, more than the $32.8 billion raised throughout 2010.
"In Europe, a handful of firms raising large funds, such as BC Partners and EQT Partners, have provided some ballast to the region's overall fund-raising levels this year," said Ms. Kreutzer.
LPs Continue to Commit to Buyout Funds
U.S. buyout and corporate finance funds raised $66.6 billion across 139 funds during the first three quarters, a 52% increase in capital over the same period last year. Within this sector buyout and acquisition funds, which saw fund-raising more than double to $30.8 billion, and industry-focused funds, which saw fund-raising jump 69% to $19 billion, pushed up the sector's total. Throughout the sector, small and mid-size funds continued to capture investors' attention.
In Europe, buyout and corporate finance fund-raising doubled to $29 billion for 53 funds during the first three quarters. Within the sector, buyout and acquisition funds saw the biggest spike as funds raised more than quadrupled to $22.6 billion for 24 funds from the $5.3 billion raised for 19 funds during the first three quarters of last year.
Secondary Funds Lose Favor in the U.S., Attract Investors in Europe
U.S. funds focused on investments in the secondary market collected $3.6 billion for 13 funds during the first three quarters, a 59% drop in capital collected from the same period in 2010. The drop comes after three years of secondary funds collecting more than $10 billion annually and general partners turn their focus from raising capital to investing it.
In Europe, six secondary funds raised $4.8 billion during the first three quarters, significantly more than the $1 billion raised for two funds during the same period last year.
Funds-of-Funds Commitments Spike in U.S., Plummet in Europe
During the first three quarters, 43 U.S. funds-of-funds raised $7.4 billion, a 74% increase in capital collected from the same period last year. This is more capital than the $6.2 billion raised throughout 2010, the worst fund-raising year on record for the sector.
In Europe, five funds-of-funds collected $269 million, significantly less than the $3.3 billion put into the 13 funds during the first three quarters of last year.
Venture Capital Fund-Raising Continues to Show Signs of Weakness
In the U.S. and Europe, venture capital fund-raising was cut in half after the 2008 recession and has yet to rebound. In the third quarter, 32 U.S. funds raised $2.2 billion, a 24% drop from the same period last year. Through the first three quarters of the year, U.S. venture fund-raising was up 9% but more than half of the $10.6 billion collected for 90 funds was committed during the first quarter.
In Europe, venture capital fund-raising is on pace to set another record low as 25 funds garnered $1.8 billion during the first three quarters, a 31% drop in capital committed from the same period in 2010. In the third quarter, four funds raised $424 million.