Market Remains Tight For Funds Of Funds

Commitments to funds of funds slipped in the first half of the year, following venture capital fundraising lower as the market remains tight.

Twenty-six funds of funds closed on new money in the first half of the year, according to the report by Prequin Ltd, the alternative asset data provider. They raised a total of about $5.5 billion, according to an excerpt of a market study Preqin released July 14.

The news parallels an account of venture capital fundraising made public earlier in July. It found 37 funds raised $2.7 billion in the second quarter. While dollar commitments rose, the number of funds getting money declined 23 percent from 48 funds in the second quarter of last year, the National Venture Capital Association and Thomson Reuters, publisher of Buyouts, reported.

The number of funds of funds raising money in the first half fell 16 percent from 31 in the same period of 2010. The amount of capital raised fell 5 percent from about $5.8 billion in the first half of last year. Preqin said the money raised in the second quarter was actually less than what investors committed to funds of funds in the first quarter. It added the largest fund to close during the first half was the $1 billion Portfolio Advisors Private Equity Fund VI.

Just more than half of the funds of funds are focused primarily on the U.S. market. Slightly more than a third target Europe. The remainder looks to Asia and the rest of the world.

Preqin said 146 funds of funds remain in the market seeking about $42 billion. About a third have had an interim close. The largest pursuing cash is HarbourVest International VI Partnership, which targets about $3 billion.