Global private equity (PE) fund-raising hit a low of $45.9 billion in the first three months of calendar 2009 – the smallest amount since 2003 – on account of the turbulent economic scenario.
“Q1 2009 represents the lowest fund-raising quarter for the private equity industry since 2003, with only 71 funds having achieved a final close, raising an aggregate $45.9 billion,” a report by global research firm Preqin said. In the fourth quarter of 2003, PE firms had raised $34 billion with 131 funds achieving final closure.
“The slowdown in fund-raising in the first quarter of 2009 has been dramatic, but not unexpected. Many of the fund managers we have been speaking with have indicated that they are going to be postponing the final closing of their current vehicles as a result of falling investor appetite,” Preqin spokesperson Tim Friedman said.
In terms of the number of funds achieving financial closure, Q1 2009 is the lowest quarter since Q3 2003, when only 67 funds did so.
“The results demonstrate the hugely challenging environment that is currently facing firms with funds on the road,” the report added. The quarter saw ‘buy-outs’ accounting for the highest amount raised as 15 funds together mobilised $22.7 billion, followed by ‘real estate’ with 22 funds raising an aggregate of $13 billion.
But Preqin projected an optimistic outlook for the second quarter of 2009, as it expects institutional investors who were holding back on new investments to return.
“We predict that fund-raising levels will increase throughout the year (2009) as a result, although with many institutions having significantly less capital available for new investments than in previous years. It may not be until 2010 that we see a return to anything like the levels of fund-raising that we have seen in recent times,” the report said.
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During the first quarter of 2009, US-focused funds were the biggest group in terms of volume and value, raising an aggregate $23 billion. While there were 39 US-focused funds, “...a total of 17 funds closed focusing on Europe, raising an aggregate $20.2 billion in Q1 2009. A total of 17 funds focusing on Asia and the rest of the world raised an aggregate $2.7 billion,” it said.
The research firm had earlier predicted that PE funds would raise $200 billion in the first half of 2009, 42 per cent less than the year-ago period. In 2008, PE funds could raise over $553 billion through 768 deals, with over $200 billion being raised in the second half of the year.