Private equity fundraising continued to accelerate in Q2 to set the stage for what will likely be a record year, new research from PitchBook shows.
The strong quarter has pushed PE fundraising for the first half of 2021 to about $545bn according to PitchBook’s latest Private Fund Strategies report – ahead of the roughly $532bn recorded over the same period last year and well above the almost $437bn collected by buyout houses in H1 2019.
That impressive figure comes despite fewer funds being raised in H1, with the industry continuing its decade-long drift towards more LP allocations becoming concentrated in the hands of an ever-smaller pool of large managers.
The Covid-19 pandemic accelerated this trend, PitchBook said, and the first half of 2021 did not seen the bounce back of fundraising by smaller and emerging managers that the data provider had previously predicted.
The report said funds smaller than $100m, which accounted for over half of the funds raised between 2013 and 2015, had made up only 38.7% thus far in 2021.
In terms of capital raised, these funds represented over 5% of fund commitments between 2009 and 2011 but only 2% in H1 2021.
Funds over $1bn in size made up 7% of capital raised in 2010 and 2011 but 32.9% of H1 2021 assets committed.
It said, “The trend toward larger managers is likely due to a combination of continued conservatism in manager selection among institutional investors and ballooning PE allocations paired with understaffed LPs—it is easier to make one big commitment than five small ones.
“Note the variation by geography – first-time fundraising in the US has fared better than in Europe in the first half of 2021.
“Q2’s figures do not include Hellman & Friedman’s $24.4bn haul, which closed in July to become the fourth largest buyout fund in history.
“Looking ahead, we expect additional massive fundraising closes in H2 2021 and 2022, including flagships from KKR, Carlyle, and Thoma Bravo.
“We are also seeing both fundraising and capital deployment timelines accelerate, resulting in firms returning to market more quickly with successor funds.
“Although the H1 2021 data for fundraising time to close still shows an uptick because of the pandemic, we expect a return to the trend of more rapid fundraises in 2022, if not H2 2021.”
Between July 2020 and June 2021 the number of fundraises in the market dropped from 3,044 to 2,103, a decline of 30.9%, while fundraising generally was down 24.3% year-on-year amid the effects of the coronavirus pandemic.
The largest declines in capital raised came from funds of funds at -63% and real estate at -60.9%, PitchBook said, while VC eked out an increase of 6.3% and secondaries only dropped 0.7%.
VC has been rapidly growing its share of private capital fundraising over the past decade, the report added.
It said, “From 6.5% of capital raised in 2013, VC has grown to 16.2% in 2021.
“By number of funds, the percentage change has been even starker – VC represented 28.1% of funds in 2013 but 46.6% thus far in 2021.
“That massive increase in share was at the expense of real estate, which plummeted from an 18.8% share of funds raised to 9.2%, and FoF, which dropped from 5.8% to 2.1%.
“Whereas many were shying away from VC after 10 years of subpar returns following the dotcom bust, the past 10 years have been a different story.”
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