Private equity fundraising expected to fall in 2020

Dec 26, 2019 | News | 0 comments

After a record year in 2019, private equity fundraising in North America and Europe is likely to slow down next year as large firms shift their focus to capital deployment, PitchBook’s analysts have predicted.

There are a small number of funds that are currently in the market looking to raise more than $10bn, PitchBook said. This contrasts with several mega-funds closed in 2019, such as Leonard Green’s two new funds raising $15bn, and Blackstone’s biggest-ever private equity vehicle, which collected $26bn.

“Plenty of large funds could be on the road — even making investments in the meantime — but may not hold a final close until 2021,” said Dylan Cox, lead private equity analyst at the data provider.

The rush to raise capital by some of the largest firms in the industry contributed to what is now the highest annual fundraising total on record in North America and Europe. According to PitchBook, funds in the two regions had raised $343bn as of mid-November 2019.

The possibility of a drawdown in public equities is also a contributing factor to the expectation that fundraising will slow in the new year. Analysts at PitchBook expect to see a “denominator effect” which will result in limited partners having to slow the pace of new commitment to private equity because other parts of the portfolio are seeing devaluations.

Despite a slowdown, analysts still expect 2020 to remain “strong when compared to almost any other year” considering the speed with which general partners have been able to raise funds lately.

Firms will also try to delay exits and hold on to some of their top-performing assets for longer in 2020, with some coming up with innovative methods.

“The GP-led [private equity firm-led] secondaries market, perhaps the largest beneficiary of extended holding times, has seen explosive growth over the past decade and is the fastest-growing sector in the secondaries space,” said Wylie Fernyhough, PitchBook analyst.

Source: Financial News

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