Record buyout fundraising and dry-powder levels in Q2: Preqin

  • Buyout funds raised a record $88 bln in Q2 2017
  • 1,001 deals were announced, for a total of $83 bln
  • Dry powder at record $918 bln, could reach $1 tln by year-end

Two second-quarter reports from data firm Preqin illuminate the state of private equity: record-setting fundraising but a challenging environment for deploying capital.

Two hundred and six PE funds reached a final close in Q2, accumulating $121 billion in investor commitments. That’s $21 billion more than was mustered by funds that closed in Q1. Buyout funds led the way, raising a record $88 billion.

“Capital commitments have now exceeded $100 billion in five of the past seven quarters,” said Christopher Elvin, Preqin’s head of PE products. That’s “an almost unprecedented sustained period of high fundraising.”

Elvin told Buyouts, “Private equity fundraising is still riding high as a result of the outsized net capital distributions that have persisted for the last few years, and there is every indication that this momentum will continue.” A trend identified by Preqin is the “return of the megafund,” for instance, Apollo Global Management‘s ninth flagship fund, expected to close at a record-setting $23.5 billion.

Private debt also had a banner quarter, with 26 funds racking up a total of $16 billion. At the start of July, 311 such funds were in the market, looking to raise a total of $145 billion.

Private real estate saw 45 funds close, 30 percent fewer than Q1’s 64. The $29 billion total represented a $7 billion, or 32 percent, improvement, however. Infrastructure slowed down but is expected to rebound. Energy dominated the natural resources sector, which also lost momentum.

But overall, fundraising activity by alternative-asset managers is at an unprecedented level: “Over 3,000 private capital funds are now seeking almost-$1.2 trillion from investors, almost twice as much as at the start of 2008.”

On the deals side, 1,001 transactions were announced in Q2, for a total of $83 billion. The deal count was little changed from the previous quarter’s 1,008, but the total value was 51 percent higher than Q1’s $55 billion.

These figures are expected to rise around 5 percent once all relevant information comes in, but Preqin noted that deal activity is still below 2016 levels. Last year, Q2 recorded 1,113 deals valued at $100 billion.

“You can’t read too much into one quarter,” Elvin wrote in an email, “but activity was perhaps on the low side of what might have been expected. What is clear is that high entry pricing and competition for assets continues to make it a very challenging environment for fund managers trying to put capital to work.”

As of June, dry powder was at a record $918 billion, and Elvin said it could reach the $1 trillion milestone by year’s end.

Action Item: Read Preqin’s fact sheets on Q2 PE fundraising and buyout deal activity.

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