Fund raising by global private equity funds has dipped to an over five-year low of $38 billion in the third quarter of 2009 as fund managers are refraining from making any new commitments before next year.
Fund raising in the third quarter of 2009 represents a 55% slump from quarter preceding it, when the funds had raised an aggregate $84 billion globally, according to a report by global research firm Preqin.
Private equity fundraising plummets to lowest levels since 2003, with the third quarter figures equivalent to just 45% of the $84 billion raised in the second quarter of 2009, Preqin said.
?Many of the funds that are closing are well short of target, and we have seen a number of fund managers putting their fund raising efforts on hold until 2010, or abandoning them altogether for the foreseeable future,” Preqin spokesperson Tim Friedman said.
However, the report noted that the investment shift from the private equity asset class is only short term and the institutional investors would pull back again in the final quarter of this year and in 2010.
?Our recent survey of institutional investors in the sector would suggest that the latter is the case, with a whole swathe of significant private equity partners readying themselves to re-enter the market in the final quarter of this year and into 2010,” Friedman said.
?For the rate of fundraising to drop by nearly 70% over the course of the year is a dramatic fall, and demonstrates just how challenging it has become to raise new funds in the current climate,” said Preqin head of communications Tim Friedman in a statement.
Private equity investors have reined back in their commitments to private equity as returns of capital have all but dried up on the back of sparse company sales.
But despite wariness from investors towards the asset class as a whole, some favoured private equity firms are still managing to raise new funds.
San Francisco-based Hellman & Friedman said on Thursday it had closed its seventh buyout fund on $8.8 billion, the largest in the firms?s 22-year history, albeit short of its initial $10 billion target.
About 54% of investors surveyed by Preqin in August said they expected to make new investments in the second half of 2009, with a further 25% expecting to return to the market in 2010, the company said.