Private Capital Funds Set For Strongest Money-Raising Year Since Before GFC

Tom Burroughes Group Editor 6 January 2017

Private Capital Funds Set For Strongest Money-Raising Year Since Before GFC

The market in private capital - spanning debt, equity, infrastructure and property - is set to see the strongest year for fundraising since before the financial crisis, an organisation says.

More than 1,000 private capital funds secured commitments of $602 billion around the world last year, research firm Preqin says, and the firm expects the final figure for the year to be 10 per cent greater as full data comes in. Meanwhile, almost 3,000 funds are in the market, seeking more than $1 trillion from investors.

Preqin, which tracks sectors such as private equity, hedge funds and real estate, said the “private capital industry has been enjoying a sustained period of strong fundraising, accumulating over $2.8 trillion over the past five years.”

“Fund managers have benefitted from growth in investor demand: institutional investor appetite for private capital has increased over recent years and 79 per cent currently invest in the industry. A similar proportion of investors have a positive or neutral perception of private capital,” it said. If the 2016 total comes to pass, this fundraising will match the kind of levels last seen before the 2008 financial crisis, Preqin said.

Some data last year suggested that fundraising, and deployment of capital, had hit headwinds, raising questions about whether there will need to be a pause for breath. In recent years, wealth management players such as family offices and private banks have pushed into private capital sectors (debt, equity) seen as offering higher risk-adjusted returns than listed securities.

On a sectoral basis, however, some areas have suffered. “While the infrastructure market is celebrating a banner fundraising year, natural resources and private debt funds are both struggling to replicate the successes they experienced in 2015,” the research firm said.

The largest funds are grabbing more capital, forcing smaller peers to work harder for commitments, it said.

“Looking to 2017, this growth period does not show many signs of ending in the coming months. Nearly 3,000 funds are currently in market at the start of the year, seeking in excess of a trillion dollars from investors. At the same time, dry powder in almost all asset classes has risen over the past 12 months, and now stands at $1.47 trillion across the industry,” it said.

Private equity, debt, infrastructure and property
Among the details of the 2016 data, Preqin said 807 funds closed globally, raising a combined $345 billion (data as of 3 January 2017). It said the figures mark the fourth consecutive year in which annual fundraising totals have exceeded $300 billion, but some way off the nearly $400 billion raised by funds closed in 2007 and 2008. 

Although the aggregate capital raised through the year was greater than in 2015, the number of funds closed was lower, down from 944 to 807 in 2016. Consequently, the average fund size in 2016 reached a record $476 million.

As for private debt, 2016 saw 119 private debt funds close globally, raising a combined $74 billion (data as of 3 January 2017), with Preqin expecting these figures to rise by up to a further 10 per cent as more information becomes available. “Although fundraising does not seem likely to approach the $96 billion raised by private debt funds closed in 2015, it is on par with the $78 billion and $75 billion raised in 2013 and 2014 respectively. However, this level of capital has been accrued by a lower number of funds than has been seen in recent years,” it continued. 

The closed-end real estate fundraising market saw 214 funds close globally, raising an aggregate $104 billion (data as of 3 January 2017). 

Some 51 unlisted infrastructure funds closed globally in 2016, raising a combined $58 billion in investor capital, a rise on the $44 billion secured the previous year (data as of 3 January 2017). This marks the highest annual fundraising total the industry has ever seen.


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