CNBC Reporting February 17th
Lawrence Delevingne | @ldelevingne
More Money Please! Record Amount of PE Funds Hit Market
Investors have more private equity funds than ever to choose from, but their money is likely to flow to a small group of huge managers.
An all-time high of 2,209 private equity funds is seeking $811 billion from investors, according to Palico, an online private equity marketplace. The previous record was 2,043 funds seeking $787 billion in February 2014. The record for the amount sought is $884 billion at the beginning of 2009, when 1,590 funds were in the market.
The largest PE funds raising money today, according to Palico listings, are: Blackstone Capital Partners VII (seeking $16 billion); Blackstone Real Estate Partners VIII ($13 billion); Oaktree Opportunities Fund X ($10 billion); TPG Partners VII ($10 billion); Lexington Capital Partners VIII ($8 billion); Riverstone Global Energy and Power Fund VI ($7.5 billion).
After several years of high returns flowing back to investors, pensions, family offices and others are hungry for more. About $61 billion in capital has been committed to private equity funds through the first half of the first quarter of 2015, 73 percent more than the amount raised in the same period last year, according to Palico.
Money may be coming in, but not everyone is getting it. (My emphasis)
“The paradox … is that while investors are investing large amounts, they are investing with fewer managers, leaving those in the most competitive and crowded sectors fighting for commitments,” said Palico founder and CEO Antoine Drean.
North American PE funds are attracting the most capital.
PE managers focusing on the U.S. and Canada have 835 funds raising money today, 37.8 percent of the market, according to Palico. U.S. and Canadian-focused managers account for a much larger 58.9 percent of the capital raised so far in 2015, an indication of the popularity of investing in the region and the large size of the funds from it.
European funds are second, with 27.3 percent of funds in the market and 22.6 percent of capital raised. Asia-Pacific is third, with 437 funds seeking capital, about 19.8 percent of the global total.
Source: Palico
The most common fund strategy offered is venture capital, which invests smaller amounts of money in promising, early stage businesses. Second are buyout funds, the best-known style of PE investing where companies are bought entirely and then theoretically improved to be resold or taken public at a profit. Third are so-called real asset funds, those focused on ownership of tangible things like housing, fossil fuels, metals and infrastructure.
Palico notes that the high degree of commitments to the strategy reflects rising demand for energy-focused funds given the rapid decline in oil prices. Existing energy PE funds were hit with losses last year, but managers including Carlyle Group and Blackstone Group see major opportunity in the relatively low cost of companies, and many of whom may need financial assistance.
“Signed…An Educated Brother!”
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