Private equity fundraising has soared to never-before-seen heights in recent years. According to statistics gathered by the financial research firm Pitchbook Data, PE firms in the United States managed to shatter fundraising records in 2019; as of November, buyout funds had raised over $246 billion for the year. This achievement continues a recent pattern of explosive growth — in 2017, investors shattered the then-record for fundraising by raising $238 billion for the year.

1. Private Equity Funding Has
Reached An All-Time High.
What Now?
By Matt Doyle

2. Private equity fundraising has soared to
never-before-seen heights in recent years. According to
statistics gathered by the financial research firm
Pitchbook Data, PE firms in the United States managed to
shatter fundraising records in 2019; as of November,
buyout funds had raised over $246 billion for the year.
This achievement continues a recent pattern of explosive
growth — in 2017, investors shattered the then-record for
fundraising by raising $238 billion for the year.
Pitchbook’s analysts believe that the fundraising gains are
due in part to the number of “outsized” (i.e., significantly
larger than the typical GP) firms operating at scale. As
they point out, US private equity funds of $5 billion or
above accounted for more than 50 percent of all
fundraising through Q3 of 2019.

3. The B&C authors further point out that the uncalled capital held in today’s buyout funds tends to cycle out more
quickly (3.0 years of investment versus 4.6 years) than the dry powder in pre-Recession-era funds. Currently,
reports indicate that buyout firms hold more than two-thirds of their dry powder in funds that are under two years.
This suggests that the recent deal cycle is turning over older capital and drawing in new money within a suitable
time frame.
Notable, too, is the volume of deals made by US PE funds. According to Dechert LLP, private equity firms invested
$569 billion in 3,817 buyouts globally — an accomplishment which they note is “a post-crisis value record and the
highest volume of deals in history.”

4. This pattern of investment seems likely to continue, given the significant
amount of capital that firms have accrued and the pressure they face to
make the most of that money. However, some companies have changed
their deployment methods to suit current circumstances. Bain &
Company analysts note that limited partners are directing increasing
amounts of capital towards buyout firms in an attempt to use their
large-scale funds. Some even believe that PE companies will, with larger
funds and enormous quantities of available capital, start regularly
targeting public companies as a source for larger deals.
Stiff competition for assets is forcing some GPs to consider more
unconventional tactics. More funds are considering long-hold vehicles —
funds designed to last for 15 or more years — for their investments. The
Dechert LLP 2020 Outlook report notes that 26 percent of surveyed
private equity firms had already established long-hold funds, while 51
percent had said that they were considering doing so. Notably, only 32
percent of firms had reported considering long-hold funds as an option
when Dechert conducted its survey last year.

5. As analysts for Dechert write: “Innovative strategies are becoming commonplace as
the industry is being forced to adapt to an overabundance of capital, with buyout
practitioners moving into growth capital and minority stake investing and raising
long-hold funds.”
In this light, the record-shattering rates of private equity fundraising are promising.
While it would pay to maintain a cautious eye on the market and sociopolitical factors,
it seems reasonable to be optimistic about the coming year — and to look forward to
innovation within the investment sector.

6. Thanks for Reading!
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