PE sets fundraising record in 2017

March 2018 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

March 2018 Issue

2017 was a record year for private equity fundraising, according to a new report from Preqin. A record $453bn was raised across 921 funds, eclipsing the $414bn raised in 2007 from 1044 vehicles.

One of the key drivers for the record year of fundraising was the popularity of ‘mega’ buyout funds – those with assets in excess of $4.5bn. Mega funds generated commitments of $174bn in 2017, up from $119bn in 2007. Apollo Global Management’s ninth fund closed on $24.6bn, making it the biggest buyout vehicle ever raised. Preqin expects the mega fund trend to continue in the coming years. Softbank’s technology-focused Vision Fund, which has yet to reach a final close, was highlighted as further evidence of the burgeoning interest in mega funds.

“2017 has proved a landmark year for the private equity industry, as it has surpassed the fundraising highs seen a decade ago. Apollo Investment Fund IX has become the largest private equity fund ever closed, breaking a record that has stood for a decade. At the same time, buyout and secondaries funds have both marked record fundraising totals, while venture capital and growth funds have continued the strong fundraising patterns seen in recent years,” said Christopher Elvin, head of private equity products at Preqin.

“While this is encouraging for the industry, it is notable that the bulk of capital raised in 2017 has been secured by the largest vehicles, with smaller funds not surpassing previous totals. This trend looks set to continue: there are still funds in market that are aiming to be the largest of their type, including SoftBank Vision Fund. Interim closes held by these vehicles have helped push the capital available to fund managers above $1tn for the first time, a landmark which both confirms the strength of the fundraising market and puts enormous pressure on fund managers to deploy capital in the coming months,” he added.

Globally, North America-focused funds were the most popular last year, raising a record $272bn. European-centric funds raised $108bn.

PE dry powder also continued to climb in 2017, surpassing $1 trillion in December, up from $838bn at the end of 2016. However, the growth of dry powder must be viewed within the wider context of the market. With persistently high asset prices and an overabundance of capital competing for targets, fund managers are finding it difficult to deploy capital, and this is expected to continue in the coming years.

2017 was a notable year for PE infrastructure funds. Last year, 69 closed-end unlisted infrastructure funds reached a final close, raising $65bn in aggregate capital. Though the final fundraising figures for 2017 were not available by the time the report was produced, Preqin expects the numbers to rise by up to 10 percent. Equally, capital totals in 2017 could mark a record high, surpassing the previous record of $66bn raised in 2016 by 81 funds. The largest to secure a close in 2017 was Global Infrastructure Partners III, which secured $15.8bn, making it the largest infrastructure fund ever.

North America-focused funds accounted for the largest proportion of infrastructure fundraising last year, with 28 funds securing $35bn. The average time it took to close an infrastructure fund fell markedly in 2017 as well. In 2016, the average fund took 26 months to achieve a close, whereas last year funds reached a close in just 18 months, the quickest average close since 2009. The average fund size also increased in 2017, up to $992m from $951m in 2016. More than half of all infrastructure funds – 54 percent – also exceeded their targets last year, up from 39 percent in 2016. Dry power in the infrastructure space climbed to $160bn.

Richard Summerfield