Fundraising plummets to six year low

Global private equity volume crashed to less than US$38bn in Q3 2009, representing a 45% fall from Q2 of this year, according to Private Equity Intelligence (Preqin).

The abysmal third quarter figures are all the more startling when compared to Q2 2007’s figures which saw a record US$208bn raised.

And while the volume of private equity has fallen, funds are also taking longer to close. In 2009, average funds spent 18 months in market. This is nearly double the time that funds took to close in 2004 (9.5months).

The poor fundraising statistics are said to caused by a lack of new commitments by institutional investors. Preqin’s recent survey of LPs showed that 59% had not made fresh commitments to funds in the first six months of the year.

Although the first half of 2009 shows a record decline in fund volumes, there is hope for the future. According to a recent survey by Preqin, more than half of investors (54%) plan to make new funds commitments in the latter part of 2009, and a further quarter expect to return to the market in 2010.

Head of communications at Preqin, Tim Friedman said: “For the rate of fundraising to drop by nearly 70% over the course of a year is a dramatic fall and demonstrates just how challenging its has become to raise new funds in the climate. Many of the funds that are closing are doing so short of target.”