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Private Equity Fund-Raising Takes a Hit
Megan Davies | January 10, 2010

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New York. Private equity fund-raising slumped to its lowest level in five years in 2009 as investors held back from making new commitments, focusing instead on their existing portfolios, according to research company Preqin.

A total of $246 billion was raised by 482 funds worldwide in 2009, down 61 percent from 2008 and the lowest level since 2004, London-based Preqin said.

The fourth quarter of 2009 represented a low point for the year, it said, with only $35 billion raised by 75 funds — the lowest quarterly total since later 2003.

Investors focused more on understanding the state of their existing portfolios, Preqin said, and spent considerably more time when considering new vehicles to invest in. In addition, negotiating terms and conditions has become more of a key concern.

“We are seeing a trend away from the bigger mega-buyout funds towards more of a focus on smaller mid-market and regionally focused vehicles,” the report said. The average length of time to raise a fund has increased dramatically in the past two years, now at more than 18 months. It previously took just a year.

The largest funds that finished fund-raising in 2009 were CVC European Equity Partners V, which raised $10.7 billion; First Reserve Fund XII, which raised $8.8 billion; and Hellman and Friedman VII, which raised $8.8 billion, Preqin said.

The largest fund that finished fund-raising in the fourth quarter was Clayton Dubilier and Rice VIII, a $5 billion buyout fund, Preqin said.

The chances of a return to the fund-raising levels seen in 2007 and 2008 are “very slim,” the research company said.

One large fund that remains in the market is Blackstone Group’s latest buyout fund, BCP VI, which has so far attracted $8 billion to $9 billion. It has said it is aiming to raise a number in the low to mid teens.

Kohlberg Kravis Roberts is expected to launch a new fund at some point, but the company is reserving judgment on when to begin marketing it, a source close to KKR previously said. KKR has about $5 billion in uncalled capital from its 2006 fund.



Reuters