LPs weigh up ahead of fund frenzy

Almeida Capital, the private equity research firm, estimates that 17 to 18 upper middle market and larger buyout funds will seek to raise that much between them in the next 12 months.

Will the goal be met? “I think it probably won’t,” said Jamille Jinnah, managing director of Almeida.”A lot of LPs are in too many of these groups and they’ll be looking to rationalise relationships down to about two or three key ones.

The end result is unlikely to be a major blow-up, but the competition may mean some groups will fall short of target. Others could take longer to raise the full amount, a trend that has already been in evidence this year.

Barclays Private Equity is seeking to raise €1.4bn, while Electra wants to collect €1.25bn. Both are targeted to launch by December and come ahead of a potential new fund next year for Bridgepoint, which is estimated at €2bn.This is on top of US rivals, which have made Europe a 50% focus of their activity compared to its 15% profile in recent years.

KKR is understood to be mulling a €3.5bn European buyout fund, Carlyle is half-way towards a €2bn fund and Bain has filled out its €750m fund. Hicks Muse is heading towards first close on its €1bn fund.

Natural selection between funds will hinge on how well they have returned money to investors. Bridgepoint, which is over the half-way mark with its current €2bn fund, aims to return €740m to investors this year.

European private equity fundraising totalled €20.4bn in the first three quarters, up 25% on the €16.3bn raised in the same period of 2003, according to Almeida Capital. The value of final closes held by buyout funds was €12.5bn, just short of €13.1bn in the same period last year. US Buy-out closes totalled US$27.8bn, compared with US$9.9bn in the same period last year.