Q1 2017 Fundraising Update
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PRIVATE CAPITAL:
NO SIGNS OF STOPPING
T
the highest ever Q1 fundraising total.
However, continued momentum in the
fundraising market is becoming a source
of increasing concern for fund managers
and investors alike. Such strong activity
has resulted in record levels of dry
powder becoming available to managers,
as investors seek to gain greater exposure
to the industry. Having so much capital
ready to deploy means that competition
among fund managers for the best deal
opportunities is fierce, and consequent
upwards pressure on asset pricing is
calling into question the ability of firms to
sustain their recent high level of returns
going forward.
he private capital industry has
seen a sustained period of strong
fundraising in recent years, with funds
closed in 2016 alone securing $669bn in
investor commitments. This momentum
has continued in Q1 2017, as 253 private
capital funds closed, raising $156bn.
Preqin expects these figures to rise
by around 10% as more information
becomes available.
Typically, the first quarter of the year
tends to see less activity, as many funds
will look to close at the end of the
preceding year. However, this does not
seem to be the case in 2017: activity in
the quarter is comfortably above the
corresponding quarter of last year, and
the total capital raised approaches the
$170bn raised in the first quarter of 2008,
Nonetheless, private capital remains
an important element of institutional
investment portfolios, and investors
565
3,172
442
369358
299
348
300 286
285
200
100
3,500
554
501
500
400
The key concern for the industry is
to avoid the emergence of a two-tier
fundraising market. Currently, the
largest private capital firms are able
to quickly raise mega funds that are
hugely oversubscribed, while emerging
managers face a long and difficult
fundraising process. As investors are
tending towards consolidation in their
private equity programs, this trend will
be monitored closely by sponsors and
investors alike.
Fig. 2: Private Capital Funds in Market over Time, 2010 - 2017
(As at 3 April 2017)
Fig. 1: Global Quarterly Private Capital Fundraising,
Q1 2012 - Q1 2017
600
are continuing to commit ever-larger
amounts of capital to fund managers.
The number of funds seeking to secure
this capital continues to grow, surpassing
3,000 at the start of Q2.
141
93 99 94
96
394
335 342
335
440
318
384
358365
324
253
199 185
201
176 162163171 183
165
145
144 141 156
118 126 123
2,651
2,500
2,000
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2013
2014
2015
2016
2017
2,098
2,235
1,500
699
607
797
758
733
793
946
1,008
1,136
500
0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Apr-17
Date of Final Close
No. of Funds Closed
1,845
1,949
1,619
1,561
1,000
2012
2,965
3,000
Aggregate Capital Raised ($bn)
No. of Funds Raising
Source: Preqin
Aggregate Capital Targeted ($bn)
Source: Preqin
CONTENTS
Private Equity
2
Private Debt
3
Real Estate
4
Infrastructure
5
Natural Resources
6
Please note, all data is correct as at 3 April 2017; figures are subject to upward revisions as further information becomes available.
1
© 2017 Preqin Ltd. / www.preqin.com
Q1 2017 Fundraising Update
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PRIVATE EQUITY:
RECORD START TO YEAR
T
Key Findings:
■ Q1 2017 saw 175 private equity funds
reach a final close, raising a combined
$89bn. This is likely to approach the
all-time Q1 fundraising record of
$105bn seen in 2008.
■ North America-focused funds raised
a total of $62bn, the highest ever
Q1 fundraising total for the region.
Europe-focused funds raised $12bn,
down from $33bn in Q1 2016.
■ Buyout funds account for $54bn
raised through the quarter, while
private equity secondaries funds
secured $13bn, the second-highest
capital total.
■ The largest fund closed in the
quarter was KKR Americas Fund XII,
which raised $13.9bn for buyout
investments in North America.
■ Private equity dry powder continued
to climb in Q1, rising from $821bn at
the end of 2016 to reach $842bn as at
the end of March.
■ At the start of April, there are 1,908
private equity funds in market,
seeking a record $635bn from
investors. This is driven in part by the
$100bn Softbank Vision Fund.
he strong private equity fundraising
activity that characterized much of
last year has continued into 2017, as the
industry is likely to record its highest Q1
capital total since the Global Financial
Crisis (GFC). Globally, 175 private equity
funds reached a final close in Q1 2017,
raising a combined $89bn in investor
commitments. Preqin expects these
figures to rise by a further 10% as more
information becomes available, thus
surpassing the $90bn that was raised by
funds closed in Q1 2016 and approaching
the all-time high of $105bn seen in Q1
2008.
This level of activity was driven by an
all-time Q1 fundraising record for North
America-focused funds. Vehicles focused
on the region secured $62bn, comfortably
ahead of the previous record of $48bn in
Q1 2016. By contrast, 31 Europe-focused
funds secured just $12bn, compared to
the $33bn they raised in the same quarter
last year, while Asia-focused funds raised
over $13bn in Q1 2017. As such, North
America accounts for more than twothirds of all capital raised in the quarter.
The first quarter of the year
is often a quieter period for
fundraising activity, after a
flurry of fund closures at the end of Q4,
but in 2017 the private equity industry is
likely to record its strongest start to a year
since 2008. This is driven by record levels
of capital being raised by North Americafocused funds, particularly since vehicles
focused on Europe failed to approach
the level of activity they recorded in the
corresponding quarter last year. This may
be an indication that, although fundraising
remains robust, it is increasingly being
centred on a small coterie of large firms
raising mega funds, many of which focus
on the US.
Looking ahead, there is cause to believe
that 2017 may ultimately come to be a
record fundraising year for the industry.
The three largest funds currently in market
comprise, by their target sizes, the largest
buyout fund raised since the GFC, the
largest ever venture capital fund and the
widely covered Vision Fund, which already
dwarfs every other private capital vehicle
ever raised after holding a first close at
$80bn.
Christopher Elvin
Head of Private Equity Products
Fig. 1: Global Quarterly Private Equity Fundraising,
Q1 2012 - Q1 2017
Fig. 2: Private Equity Fundraising in Q1 2017 by Primary
Geographic Focus
400
120
359
346
350
305
250
220
187
200 172
220
204
187
150
50
254
228
223
47
60 56 64 49
66
61
218
271
248
235
235
199
188
175
119
113
89
100
100
285
300
119
71
93
69 76 65
117
100 89
90
65
99
80
62
60
40
31
27
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012
2013
2014
2015
Date of Final Close
No. of Funds Closed
2016
2017
Aggregate Capital Raised ($bn)
Source: Preqin Private Equity Online
13
12
0
18
2
0
North America
Europe
No. of Funds Closed
Asia
Rest of World
Aggregate Capital Raised ($bn)
Source: Preqin Private Equity Online
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Q1 2017 Fundraising Update
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PRIVATE DEBT: DIRECT LENDING
SPARKS STRONG Q1
he private debt industry recorded a
strong start to 2017, as 21 vehicles
reached a final close attracting $21bn
in investor capital. Preqin expects these
figures to rise by around 10% as more
information becomes available. Although
fundraising will still fall well short of the
record $50bn secured in Q4 2016, the
level of capital secured already surpasses
the levels seen in three of the last five
quarters, and is comfortably higher than
in Q1 2016 ($11bn), marking a positive
start to 2017.
■
Direct lending funds in particular drove
fundraising, securing their highest
quarterly total of all time. Twelve funds
raised a combined $13bn in investor
capital, exceeding the previous high
of $12bn in Q3 2015. The two largest
vehicles to close both operate direct
lending strategies, and raised an
aggregate $6.8bn between them. All
other strategies recorded lacklustre
fundraising, with no private debt funds of
funds or venture debt vehicles reaching a
final close. Four mezzanine funds secured
a combined $1.2bn in investor capital,
while one distressed debt vehicle, Carlyle
Strategic Partners IV, closed on $2.5bn.
■
T
After a sluggish start in 2016,
private debt fundraising saw a
huge acceleration in the pace
of fundraising over the year, and secured
a record $50bn of investor capital in
Q4. While the opening quarter of 2017
has not matched this level of investor
commitments, momentum has nonetheless
continued into the year, particularly for
direct lending strategies. Fund managers
have been able to reach a final close quickly
and successfully, often closing far in excess
of their stated target size.
Twenty-one private debt funds closed
in Q1, securing $21bn in investor
capital, a substantial downtick on the
record $50bn raised in the previous
quarter.
Direct lending funds accounted for
the majority of quarterly fundraising
with 12 funds securing $13bn, 57%
and 62% of the aggregate totals
respectively.
Nearly two-thirds (63%) of private
debt funds closed in Q1 exceeded
their target size, the largest
proportion in the past five years.
Dry powder reached $200bn by the
end of Q1, an increase of $4bn from
the end of 2016 so far but still down
on the $215bn recorded at the end
of 2015.
Fundraising prospects are bright,
with 283 private debt vehicles on the
road targeting a combined $112bn in
investor capital.
Direct lending strategies look set to
continue raising the bulk of investor
capital, with 126 funds targeting a
combined $43bn.
■
■
■
■
Looking ahead to the rest of the year, the
fundraising pipeline looks strong both in
terms of the number of vehicles marketing
themselves to investors, and their hopes of
raising significant sums of capital. Direct
lending funds look likely to continue to
secure the bulk of investor commitments,
while the four largest vehicles on the road
are all looking to make investments in
distressed assets. Investor appetite remains
robust, and fund managers are hoping to
build on recent positive performance to
deploy even more capital over 2017, putting
investor commitments to work.
Ryan Flanders
Head of Private Debt Products
Key Findings:
Fig. 1: Global Quarterly Private Debt Fundraising,
Q1 2012 - Q1 2017
Fig. 2: Private Debt Fundraising in Q1 2017 by Fund Type
14
60
53
22
15
18 17
24
22
6
24
22 21
13
12
8
32
31
29
11
2121
12
4.2
4
4
1.3
2
0 0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012
2013
2014
2015
2016
2017
Date of Final Close
No. of Funds Closed
Aggregate Capital Raised ($bn)
Source: Preqin Private Debt Online
Distressed
Debt
0
0
3 2.6
2
No. of Funds Closed
0 0.0
Venture
Debt
9
17
12
24
20
33
29
10
Mezzanine
10
20
39
37 36
Direct
Lending
20
37
34
30
30 27 27
44 44
42
39
13.0
12
Private Debt
Fund of Funds
39
40
12
Special
Situations
50
50
44
Aggregate Capital Raised ($bn)
Source: Preqin Private Debt Online
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Q1 2017 Fundraising Update
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REAL ESTATE:
MOMENTUM SLOWS IN Q1
T
Key Findings:
■ Thirty-eight private real estate funds
closed globally in Q1 2017, raising a
combined $16bn. This is down from
72 funds that raised a total of $32bn
in Q4 2016.
■ Twenty-seven North America-focused
funds raised a combined $12bn, while
six funds closed focusing on Europe,
raising $2.1bn.
■ Value added funds account for the
majority of both funds closed and
capital raised, as 17 such funds
secured $6.9bn. Ten opportunistic
funds secured $4bn, the next largest
proportion.
■ The largest fund to reach a final close
in Q1 2017 was Cerberus Institutional
Real Estate Partners IV, a distressed
fund which closed on $1.8bn.
■ Dry powder available to private real
estate fund managers rose slightly
across the quarter, from $237bn at
the end of 2016 to a new record of
$245bn at the end of Q1.
■ At the start of Q2 2017, there are 554
real estate funds seeking investor
capital, targeting a combined $189bn.
he closed-end private real estate
market saw strong fundraising activity
in 2016, but this momentum seems to be
waning in early 2017. Twenty-eight real
estate funds globally reached a final close
through the quarter, raising a combined
$16bn from investors, and Preqin expects
this number to rise by around 10% as
more information becomes available. This
is a decline from fundraising totals seen in
the first quarter of last year ($26bn), and
does not approach the $32bn raised by
real estate funds closed in Q4 2016. At the
same time, the number of funds reaching
a final close declined sharply, falling from
72 in the last quarter of 2016 to just 38
in Q1.
Looking ahead, the fundraising market
looks set to remain very competitive
in the remainder of 2017. New funds
continued to come to market in Q1, and
overall the number of vehicles seeking
capital from investors rose from 533 at
the start of 2017 to 554 as at the start of
Q2. However, the capital sought by those
funds stayed level at $182bn. Of these
funds, 334 have already held an interim
close, securing $70bn of their aggregate
targets.
The private closed-end real
estate industry has been in a
prolonged period of strong
fundraising activity in recent years: funds
closed since the start of 2013 have raised
more capital than even those closed in the
2006-2008 period. It would seem initially
that this momentum might be slowing in
the first quarter of 2017, though, as both
the number of funds reaching a final close
and the aggregate capital secured failed to
match the levels seen the previous quarter.
However, the overall fundraising
environment remains encouraging despite
the level of competition. Of particular note
are the multibillion-dollar funds currently in
market. Several have already held interim
closes, and may well be on course to reach
a final close before the end of the year. If
this does happen, we could see 2017 rise to
match 2016 as another landmark year for
the industry.
Andrew Moylan
Head of Real Estate Products
Fig. 1: Global Quarterly Closed-End Private Real Estate
Fundraising, Q1 2012 - Q1 2017
Fig. 2: Closed-End Private Real Estate Fundraising in Q1 2017 by
Primary Strategy
140
18
16
14
12
10
8
6
4
2
0
40
33
29 29
29 25
24
60
59 55
43
36
34
23
26 26
34
25
32
38
15
10
6.9
4.0
2
Core
17 15 15
61
56
49
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012
2013
2014
2015
2016
2017
Date of Final Close
No. of Funds Closed
Aggregate Capital Raised ($bn)
2
0.8
2 1.9
0.6
No. of Funds Closed
1
0.2
1 0.7
Secondaries
72
Fund of Funds
61
82
Distressed
92
82
65 69
40
20
92
79
Debt
60
92
68 72
Opportunistic
80
Value Added
113
100
17
Core-Plus
120
119
Aggregate Capital Raised ($bn)
Source: Preqin Real Estate Online
Source: Preqin Real Estate Online
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Q1 2017 Fundraising Update
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INFRASTRUCTURE:
GIP III SETS RECORDS TUMBLING
Q
1 2017 marked a record quarterly
fundraising total for unlisted
infrastructure fund managers, as 16
vehicles raised a combined $30bn. Preqin
expects these figures to rise by around
10%, but capital commitments are
already more than double those seen in
Q4 2016 ($13bn), and exceed the previous
record total of $26bn seen in Q3 2016.
The $15.8bn final close of the largest ever
vehicle, Global Infrastructure Partners III,
was the main driver behind this record,
as it surpassed the $14bn secured by
Brookfield Infrastructure Fund III in Q3
2016, while four more multibillion-dollar
vehicles also reached final closes in Q1.
The established markets of Europe and
North America offer investors a landscape
of relative economic and political
stability, and so it is of little surprise that
these regions continue to attract the vast
majority of capital. Through Q1, North
America-focused fundraising totalled
$18bn, while investors committed $6.7bn
to Europe-focused vehicles, accounting
for 60% and 23% of the aggregate total
respectively as both regions neared
record levels. Only one Asia-focused fund
reached a close, but four vehicles focused
on opportunities outside these markets
secured $4.8bn.
Key Findings:
■ Sixteen unlisted infrastructure funds
closed in Q1 2017, raising $30bn – an
all-time high for the industry – up on
the previous record of $26bn secured
in Q3 2016.
■ Global Infrastructure Partners III
closed on $15.8bn, making it the
largest infrastructure vehicle of
all time, surpassing Brookfield
Infrastructure Fund III ($14bn).
■ Half of funds closed in Q1 raised 125%
or more of their target size, while
funds spent an average of 16 months
on the road.
■ Dry powder available to infrastructure
firms rose to a record $147bn, an
increase of $10bn from the end of
2016 and up on the $109bn recorded
at the end of 2015.
■ The fundraising pipeline is strong,
with 175 funds currently in market
seeking $100bn in investor capital,
$20bn less than at the start of the
year.
■ The largest vehicles in market at the
start of Q2 are Alinda Infrastructure
Fund III and MCPP Infrastructure,
which are both seeking $5bn in
capital commitments.
Fig. 2: Unlisted Infrastructure Fundraising in Q1 2017 by Primary
Geographic Focus
20
38
30
17
11
10
11
7
3
12
14
16
7
3
26
25
26
21
21
20
20
5
30
24
24
25
15
17.8
18
35
30
4
19
1615
16
121211 12
10
10
10 9
8 9
7
7
16
14
21
12
18
16
13
10
8
7
6.7
6
4
4
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012
2013
Investors continue to see strong riskadjusted returns from their infrastructure
portfolios, and thus remain committed to
the asset class. However, fund managers
will be aware that a competitive deals
environment is pushing up valuations,
and blue-chip assets are increasingly
difficult to acquire. This pricing pressure
could potentially eat into eventual returns,
but with the majority of investors underallocated to the industry, firms will still be
confident of attracting capital. Moreover,
the fundraising pipeline remains robust,
and with countries looking to add and
improve their national infrastructure as well
as addressing challenges such as meeting
Paris Agreement obligations, the future has
seldom looked brighter for the asset class.
Tom Carr
Head of Real Assets Products
Fig. 1: Quarterly Global Unlisted Infrastructure Fundraising,
Q1 2012 - Q1 2017
40
Global Infrastructure Partners III
dominated the headlines in Q1,
when it became the largest ever
infrastructure vehicle raised, surpassing
the previous record set just two quarters
earlier by Brookfield Infrastructure Fund III.
With several other multibillion-dollar funds
closing through Q1, fund managers will be
heartened that investors’ stated appetite
for infrastructure is manifesting itself in two
record fundraising quarters out of three.
2014
2015
Date of Final Close
No. of Funds Closed
2016
2017
Aggregate Capital Raised ($bn)
Source: Preqin Infrastructure Online
4
2
1
0.1
0
North America
Europe
No. of Funds Closed
4.8
Asia
Rest of World
Aggregate Capital Raised ($bn)
Source: Preqin Infrastructure Online
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NATURAL RESOURCES: ENERGY
VEHICLES PROPEL FUNDRAISING
T
he unlisted natural resources industry
saw 17 funds reach a final close in Q1
2017, raising a combined $25bn; Preqin
expects this total to rise by a further 10%
as more information becomes available.
This represents a significant increase
from the $14bn raised by 28 funds in the
previous quarter, and is twice the level
of capital raised in the same quarter of
2016. Fundraising was largely driven
by the closure of Global Infrastructure
Partners III, which is expected to deploy
a significant proportion of its capital in
energy-related investments.
Looking ahead, there are some
encouraging signs for the industry as
a whole regarding the prospects of
future fundraising activity. Although
the market continues to be dominated
by vehicles focusing on energy assets,
Q1 2017 did see the closure of the
largest ever water-focused fund, as well
as sizeable vehicles focused on timber
and agriculture. Energy-focused funds
account for two-thirds of capital targeted
by funds currently in market, but growth
in the agriculture and mining sectors sees
these funds now target $12bn and $9bn
respectively.
Key Findings:
■ Seventeen unlisted natural resources
funds reached a final close in Q1 2017,
raising a combined $25bn.
■ The closure of Global Infrastructure
Partners III, which secured $15.8bn in
investor commitments, accounted for
the majority of total capital raised.
■ Ten funds worth a combined $18bn
are focused on North America, while
three funds raised $2.1bn to invest in
Europe, and two funds raised $4.5bn
to deploy in multiple regions.
■ Twelve of the funds closed in the
quarter will focus on energy-related
assets, and raised a total of $24bn.
Agriculture, timber, and water each
saw one fund close.
■ Dry powder waiting to be deployed
by natural resources fund managers
has declined in the past 15 months,
and now stands at $73bn.
■ At the start of Q2 2017, there are
currently 250 unlisted natural
resources funds in market globally,
seeking a combined $110bn in
investor commitments.
The overriding narrative of
unlisted natural resources
fundraising in the first quarter
of 2017 is that of Global Infrastructure
Partners III, which became the largest
closed-end real assets fund ever upon final
close. Apart from this, fundraising through
the quarter was roughly on par with
previous quarterly totals seen in Q4 2015
and Q2 2016. However, the ability of firms
to raise such a large vehicle, which will be
focusing in part on energy-related projects,
shows that there is clearly an appetite
among investors for natural resources and
real assets funds.
While much of this appetite is currently
focused on and serviced by funds making
energy investments, there is distinct growth
in other areas of the market, particularly
agriculture. Additionally, more miningfocused funds continue to come to market,
as some managers sense that the long
drawdown in this sector may now have
overcorrected. If this is the case, we may
see a sharp uptick in activity in this sector
through the remainder of 2017.
Tom Carr
Head of Real Assets Products
Fig. 1: Quarterly Global Unlisted Natural Resources Fundraising,
Q1 2012 - Q1 2017
Fig. 2: Unlisted Natural Resources Funds Currently in Market by
Primary Strategy (as at 3 April 2017)
70
160
60
149
140
58
120
50
100
2012
2013
2014
2015
2016
Date of Final Close
No. of Funds Closed
Aggregate Capital Raised ($bn)
2017
Source: Preqin Natural Resources Online
49
40
20
17
12.2
8.8
18
3.1
5 2.5
12 9.2
0
No. of Funds in Market
Diversified
Natural
Resources
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
60
Water
0
74.1
80
Timberland
31
27
Metals &
Mining
32
29
26 26
26 28 25
25
2628
24
22
2221
21
21 20 22
19 18
17 17
17
20 19
161718
14
15
13
13
11
10
9
8
8
7
10
30
Energy
40
36
Agriculture/
Farmland
40
Aggregate Capital Targeted ($bn)
Source: Preqin Natural Resources Online
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