Global PE Fundraising Rises in Q2

Private equity fundraising last quarter rose by 28% to $76.2 billion, according to data released this morning by industry research firm Preqin.

That total comes from 82 funds from all over the world, including vehicles focused on buyouts ($33.9b), natural resources ($9.9b), real estate ($8.9b), secondaries ($8.4b), venture capital ($4.7b), fund-of-funds ($7.7b) and mezzanine ($1.2b).

Sounds kind of impressive on first glance, but the top-line number should not overshadow what is mostly a negative report. Among the downers:

– The Q209 tally is off more than 60% from the $213 billion raised in Q208 (which was an all-time record).

– The number of funds currently seeking capital has dropped by 10% over the past three months. This includes some of the 30 abandoned fundraising efforts so far in 2009, which matches the entire 2008 total.

– The average fundraising now takes 18.3 months, which is an all-time high, and nearly double the average just five years ago.

– The venture capital results are paltry, particularly in Europe (just $400m raised).

The entire study is below, but I quickly want to emphasize that fundraising highs or lows do not necessarily correlate to the overall health of private equity, or to its ability to generate returns. After all, it isn’t private equity’s fault that value drops in public securities caused a denominator effect that squeezed out new commitments to non-liquid assets. At the same time, however, the current lag in new fundraising attempts is only partially due to LP reticence. And equal piece is that dealmaking remains unsuaully sluggish — particularly leveraged dealmaking — which has slowed down the need for new funds by many firms that raised in between 2006 and 2008.

Q2 Fundraising 2009(2)