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March quarter PE fundraising likely to cross $90 billion

Deal activity in first three months of 2017 at $89 billion; figure likely to go up as more information becomes available, say experts


Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint

Private equity firms saw record fundraising activity since the global financial crisis in the first three months of 2017, with a total of 175 global private equity vehicles raising a combined $89 billion in investor commitments, British financial data research firm Preqin said.

The figure may go up by 10% as more information becomes available, crossing the $90 billion raised in the March quarter of 2016 and approaching the all-time high of $105 billion seen in the March quarter of 2008, it said in a report.

Fundraising was driven by record capital commitments secured by North America-focused funds, which raised a total of $62 billion. Asia-focused funds raised over $13 billion during the quarter.

Besides, private equity dry powder, or the amount raised but yet to be deployed, rose from $821 billion at the end of 2016 to reach $842 billion at the end of March, data shows.

At the start of April, 1,908 private equity funds were seeking to raise a record $635 billion from investors. A big chunk of this is the $100-billion Softbank Vision Fund.

In India, about two dozen private equity industry executives are in the process of raising up to $2 billion for their new funds, and anecdotal evidence suggests that they may be able to do so—an indication that limited partners (LPs) or those who invest in funds believe in the emerging India story, Mint reported in July last year. The $2 billion number doesn’t include the amount being raised by established private equity funds.

In another recent report, Preqin had said that venture capital fundraising in Asia is on track to make 2017 a landmark year with almost 200 funds seeking capital from investors to deploy in venture capital opportunities in Asia.

Cumulatively, 333 Asia-focused venture capital funds have raised $43.3 billion since the start of 2014, of which $4.9 billion has been raised by 49 India-focused funds. Of the total, China-focused have raised a combined $27.6 billion since 2014.

At the start of March, 183 Asia-focused venture capital funds were seeking a combined $56 billion from investors, including the China state-owned venture investment fund, which is in the market to raise around $29 billion.

If it reaches the target size, it will become the largest venture capital fund ever.

Of the total funds, 85 Asia-focused have already held an interim close, securing $28 billion in investor capital, which is more than half of the amount targeted.

“The development of the venture capital industry in Asia has undoubtedly been one of the major success stories of recent years. Robust fundraising and healthy deal flow have established the region as a key player in the global industry, and with domestic and international investors increasingly targeting Asia-based start-ups, it is of little surprise that fundraising looks set to accelerate in 2017,” Felice Egidio, head of venture capital products at Preqin said in the report.

The number of active venture capital fund managers based in India stood at 68.

In 2016, two of the country’s biggest venture capital funds were raised. While in February 2016, Sequoia Capital India, which is country’s largest venture capital firm, raised a massive $920 million fund, Accel Partners India closed commitments for a $450 million fund, only the second fund of that size since the one raised by Nexus Venture Partners in December 2015.

At the recently concluded Mint Annual Private Equity Conclave, heads of India’s largest venture capital firms noted that India’s top funds are still looking for successful exits that are proving elusive in a rapidly transforming start-up ecosystem.

As of early November, Mint reported, citing Preqin data, that the dry powder available with India-focused venture capital funds stood at a record $3.1 billion. By most accounts, investors will continue to be extremely selective on how to invest this money.

Meanwhile, institutional investors surveyed by Preqin remain positive towards private equity across the globe and view India as third largest within emerging markets that are the presenting the best opportunities.

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