U.S. Private Equity Fund-Raising Down 64% at Half-Year Point but May Regain Momentum as Stocks Stabilize
July 08 2009 - 6:30AM
PR Newswire (US)
Dow Jones Private Equity Analyst: PE Firms Raise $54.9 Billion in
First Half of 2009; Secondary Funds Attract Bargain Hunters, Set
Annual Record Already NEW YORK, July 8 /PRNewswire/ -- At the
halfway point of 2009, private equity firms raised just over
one-third the capital they were able to attract from pension funds,
university endowments, foundations and other investors in the first
half of 2008. According to new analysis by Dow Jones Private Equity
Analyst, the first six months of 2009 saw 173 private equity funds
raise $54.9 billion, 64% less than the $152.7 billion raised by 261
funds during the first half of 2008 and the lowest mid-year total
raised since 2005. However, there are signs the fund-raising market
may be thawing as the stock market stabilized somewhat in the
second quarter and limited partners--institutions and firms that
invest in private equity firms--gained a better grasp on the state
of their balance sheets. "Limited partners are still reeling from
the extreme shrinkage of their assets under management since last
fall," said Jennifer Rossa, managing editor of Dow Jones Private
Equity Analyst. "Many limited partners found themselves well over
target allocations and unable to commit to the asset class while
others chose to sit on the sidelines altogether or only committed
to the best managers, even if they did have cash on hand. As a
result, any private equity firm that could afford to delay raising
a fund did and those that had to brave the market in the first half
of the year faced tough conditions." In 2008, private equity firms
raised a total of $287.5 billion, second only to the record $343.3
billion raised in 2007. Buyout Funds Still the Big Draw Though the
Funds Aren't as Big According to Dow Jones Private Equity Analyst,
leveraged buyout (LBO) and corporate finance funds continue to
attract the largest proportion of capital investment. In the first
six months of 2009, 73 buyouts funds raised $28.7 billion, 72% less
than the $102.6 billion raised by 98 similar funds during the same
period last year. Notably missing from this year's fund listing are
'mega' funds, those with targets of $8 billion or more that were so
popular during the private equity boom from 2006 to 2008 that many
had to increase their sizes several times to accommodate investor
demand. In 2009, just three funds reported investment goals over $8
billion and none had reached or surpassed their minimum targets by
the halfway mark. Secondary Funds Attract Bargain-Minded Investors
The difficult economy has many cash-strapped pension funds,
endowments and foundations looking to sell their stakes in private
equity funds. Secondary funds, which pool capital from investors to
purchase existing stakes in private equity funds--often at a
discount--have seen a big boost in investor interest. According to
Dow Jones Private Equity Analyst, 18 secondary funds have raised
$13.9 billion in capital, setting a new annual record for the fund
category with six months left in the year. "It is clear that
secondary fund managers are getting ready for some record
deal-making," said Ms. Rossa. "Once private equity firms start
doing deals again, cash-conscious LPs are going to find it
difficult to meet capital calls and will likely look to sell some
of their private equity fund stakes to secondary buyers." Venture
Industry Suffering Worst Year Since 2003 Compounding the recent
news of decade-low deal activity and declining liquidity, the
venture capital industry saw a 63% decline in fundraising in the
first half of 2009. Fifty-one venture funds raised $5.1 billion
during this time compared to $13.6 billion raised by in 115 such
funds in same period last year. This marks the worst first-half
total for venture capital investment since 2003 when 34 funds
raised $2.2 billion. The first half of 2009 saw $1.3 billion
invested in seven mezzanine funds, down 95% from the record total
raised a year ago, and $5.9 billion put in 23 funds of funds, down
38%. The largest fund closing of the first half of 2009 belongs to
Hellman & Friedman. It raised $6 billion for its Hellman &
Friedman Capital Partners VII LP buyout fund, which is still open
with a$10-billion target. Contact Adam Wade at 415-439-6666 or with
journalist inquiries, or follow the story at
http://www.twitter.com/DJPrivateEquity. For general information
about Dow Jones Private Equity Analyst, visit
http://privateequity.dowjones.com/. ABOUT DOW JONES Dow Jones &
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