A survey highlights how UK-based VC and private equity firms' senior figures see money that has been raised but not invested yet to pile up next year, with a significant number seeing headwinds for capital-raising becoming stronger.

A survey of C-suite private equity and venture capital firms in the UK expect the amount of money that has been raised but not yet invested to climb further next year, driven by high inflows and a shortage of attractively-valued deals.

The views, compiled by Intertrust, which provides fund, trust and corporate services, found that 73 per cent of chief financial officers and chief operating officers expect their “dry powder” to increase in 2018. The survey also found that 45 per cent of respondents said they expect the private equity fundraising climate in 2018 to resemble 2017. 

As a sign of possible headwinds, however, a significant minority of CFOs and CFOs – 41 per cent – expect conditions for raising capital to become more challenging and only 14 per cent expect conditions to become easier.

The private capital and VC sector has seen increased fund-raising activity globally, as reported recently by Preqin, the research firm. As at November this year, private equity vehicles closed in 2017 have raised $406 billion, beating the $403 billion raised by funds for the whole of 2016. That organisation noted that fund managers are raising larger vehicles, with the average size of vehicles closed this year at $542 million, above $434 million for funds closed in 2007. Some “mega funds” have boosted the totals this year, such as the closing of a PE fund, Apollo Investment Fund IX, on $24.7 billion in July, and Silver Lake Partners V ($15 billion), |KKR Americas Fund XII ($13.9 billion) and Vista Equity Partners Fund VI ($11 billion).

With the volume of dry powder expected to reach £1 trillion by the end of 2017 driven by cash-rich but yield-starved institutional investors, the majority (54 per cent) of CFOs and COOs expect valuations to continue heading upwards over the year ahead.