PE fund-raising at 8-yr-low in Jan-Mar: report

Difficult fund raising conditions slowed the pace of global private equity (PE) fund-raising activities to an eight-year low of $42 billion in the January-March period of 2011, says a research report by Preqin.

It is clear that fund-raising remains extremely challenging, but it is expected to rise as the year progresses, according to Preqin.

As per the report, 92 private equity funds worldwide raised an aggregate $42.3 billion in the January-March quarter of the 2011 calender year, the lowest level since 2003.

The quarterly figure represents a decrease of 11% from the $47.1 billion collected in the October-December quarter of 2010.

"The private equity fund-raising market is currently in a transitional period. The majority of the significant funds which began fund-raising prior to the onset of the financial crisis have now closed, with vehicles closing in Q1 (January-March), 2011, having mostly launched in 2009.

"With the typical fund raise now taking around 16 months from launch to finish and with 2009 being a slow period for new fund-raising launches, it is logical that Q1, 2011, would be a slow period for final closes and we are anticipating an increase as 2011 progresses," Preqin Spokesperson Tim Friedman said.

Following a consistent fall in the number of funds and the aggregate collections during 2009 and most of 2010, the first quarter of 2011 has seen a rise in both the number and value of funds being raised -– a sure sign of rising confidence among fund managers that conditions are starting to improve.

There are currently 1,649 funds on the road seeking $663 billion worldwide -– this represents the highest-ever number of managers in the market at one time.

Funds primarily focusing on the US have raised the most capital during the first quarter of 2011, with 45 funds garnering a total of $25.9 billion.

With respect to funds focused on Asia and the rest of the world, excluding the US and Europe, 24 such funds raised a total of $9.9 billion in the first quarter of 2011, while 24 European-focused funds mopped up an aggregate $6.5 billion.

Buyout funds raised the most capital, with 20 funds raising an aggregate $12.6 billion. Four natural resources funds collected a total of $5.1 billion, including EnCap Energy Capital Fund VIII, which at $3.5 billion was the largest fund to achieve a final close during the quarter.

Looking forward, conditions appear far more encouraging, as 38% of the investors surveyed plan to invest more capital in 2011 than in 2010 and 32% intend to allocate the same amount of capital as they did last year.