New GPs tame challenges with above-target funds

On Tuesday, two mid-market PE firms announced above-target final closes for their inaugural funds, reflecting institutional investors’ willingness to roll out the welcome mat for well-resourced debut fund managers.

 However, the funds’ ability to beat their capital targets belies a still-challenging fundraising environment for first-time managers, as LPs flock to successor funds launched by PE giants.

Private equity fundraising has returned to growth since the start of 2021. However, as established PE giants return to market quickly to raise successor funds, first-time fundraising has faced obstacles, said Rebecca Springer, a senior PE analyst at PitchBook.

Get the week’s top news delivered directly to your inbox – Sign up for our newsletter

“It’s an extremely positive fundraising environment overall,” she said. “But as LPs scramble to re-up with established managers coming back to market with large funds at an unprecedented pace, it has posed challenges for some emerging managers.”

“High-profile spinouts from large firms were still able to close large-sized funds, but if you are a small generalist emerging manager whose founding team has less prestigious resumes, this could be a more difficult fundraising environment,” she added.

While the total value of first-time funds rose from around $11bn in 2020 to more than $15bn in 2021, the total number of funds raised was down to 68 last year, compared to 90 the previous year, according to PitchBook data.

Source: Pitchbook

Can’t stop reading? Read more