Among the casualties of the COVID-19 crisis are private equity and venture capital, at least in terms of their fundraising prowess. These sectors have, however, amassed considerable "dry powder" in recent years, and some observers had already expected some deceleration before the virus hit.

The global pandemic hit private equity and venture capital fundraising hard in the first quarter of this year, mirroring the selloff to listed equities as investors contemplated months of disruption, figures show.

There were 267 private equity and VC funds reaching a final close in Q1, falling by 27 per cent on the same quarter a year earlier, according to Preqin, the research firm tracking alternative investments. 

The total amount of capital raised by PE and VC funds in Q1 2020 was, however, still “significant”, Preqin said, standing at $133 billion and beating the Q1 2019 figure of $119 billion.

Even before the effect of the coronavirus crisis smashed into markets, the private capital sector had – in some quarters - been fretting about about $2.44 trillion of “dry powder” - money to be invested, on the sidelines. A decade of very low interest rates and low yields on listed equities and conventional bonds encouraged an influx into private markets.

Preqin said that the number of VC deals completed in Q1 2020 fell by 23 per cent compared with the same period in 2019, while aggregate deal value fell by 12 per cent. In Greater China, the number of venture capital deals completed in Q1 2020 slumped by 46 per cent.

Aggregate private equity-backed deal value in Q1 2020 was 17 per cent lower than in Q1 2019, but was relatively level with Q3 and Q4 2019.

Private equity investors favored developed markets. North America- and Europe-focused funds together captured more than 89 per cent of the aggregate capital raised globally in Q1 2020, representing 209 of the 267 funds closed. After rebounding into Q3 2019 with $46 billion in commitments, Asia-focused funds failed to maintain this momentum, securing $9.9 billion in Q1 2020.

Preqin said that the number of private equity funds in market globally (3,620) and the amount of capital targeted ($933 billion) as of April 2020 “remains strong”, only down by 3 per cent and 4 per cent respectively from the highs of January 2019. 

In terms of fundraising, the largest firms continue to dominate with only 11 per cent of firms looking to soak up 71 per cent of capital targeted.