Private equity firms raising successor funds at a faster rate: report
In 2018, it took an average of 42 months between the close dates of a predecessor and successor private equity fund
Private equity firms are raising successive funds at a faster rate as they look to take advantage of institutional investors’ liquidity and appetite, and gather as much capital as possible, said global alternate asset data tracker Preqin.
“Private equity firms are leaving less time on average between their fundraising cycles, with the period between predecessor and successor funds falling since 2013,” Preqin said in a report.
In 2013, on average, the time taken between the final close of a predecessor and successor private equity fund was just over 52 months.
Since then, there has been a year-on-year decrease in the average time between the final close dates of a predecessor and successor private equity fund.
In 2018, it took an average of 42 months, according to Preqin.
However, Preqin said while the average time between fund closures has fallen by 10 months since 2013, it is still higher than it was in 2008.
It said also that the median proportion of called-up capital in predecessor funds at the time that successor funds have closed has remained relatively constant and has fallen below 80%.
Also, even as dry powder (capital available with private equity funds for deployment) has risen above one trillion dollars, the ratio of dry powder to called-up capital has remained broadly flat, suggesting that fund managers are deploying capital at a similar rate as they are securing it.
“There has been much debate over whether or not we are in a bubble. Record-breaking fundraising, rising dry powder and quicker fundraising cycles have led some to suggest that fund managers are stockpiling capital. But it seems that while fundraising speeds are falling, fund managers are deploying more than 80% of the capital in their funds before closing a successor. This chimes with dry powder to capital called ratios, which have remained below 3.0 since 2015, well below the peak of 3.9 seen in 2010. Fund managers are certainly taking in more capital than ever before, but they are also deploying it at a commensurate rate,” said Christopher Elvin, head of private equity at Preqin.
Editor's Picks »
- Markets yet to warm up to KEC International’s record order book
- Indraprastha Gas and Mahanagar Gas shares are low on fuel
- Overhang of capacity constraints lifts for ACC, Ambuja Cements
- Stock market traders fall for the ‘buy rural’ narrative, once again
- Continuing volume momentum puts Indian ports in a good position