By Hillary Canada
While it wasn't the best of times or the worst of times, per se,
private equity fundraising in the U.S. and Europe last year looked
very much like "A Tale of Two Cities."
With a flush debt market stateside allowing general partners to
parse out distributions and strike new deals, private equity
fundraising totals, including buyout, venture capital, mezzanine,
secondary and fund of funds, rose 20% from $133 billion raised in
2011 to $160.4 billion during 2012, according to data from Dow
Jones LP Source.
The increase in U.S. fundraising came in spite of a dreary
second half, during which fundraising was down more than 20%
compared with the first half.
In reality, the second half more closely resembled the story
unfolding across the Atlantic, as macroeconomic worries and a lack
of available debt financing brought the fundraising recovery to a
halt. After a nearly 60% jump in fundraising totals between 2010
and 2011, the amount of capital raised during 2012 actually
declined 1.8% to $58.1 billion from $59.2 billion a year
earlier.
Without debt to fund new deals or distributions to shareholders,
fundraising by buyout, coinvestment, growth, industry-focused and
restructuring funds in Europe declined nearly 17%, to $38.9 billion
from $46.8 billion. With the exception of 2009 and 2010, it was the
worst fundraising year for the sector since 2004.
This contrasted starkly with the U.S. market where fundraising
for that sector increased by a quarter to $114 billion, from $91.4
billion.
Despite the bad press given to large buyout firms during the
year, more than 65% of that total was raised by funds of greater
than $1 billion. More than a quarter of that $114 billion was
raised by just five funds, including vehicles from Oaktree Capital
(OAK), Providence Equity Partners, Ares Management, Warburg Pincus,
and Advent International's behemoth Advent International GPE VII
LP, which closed with $10.8 billion.
Fortune also smiled upon those in the U.S. mezzanine market, as
yield-starved investors filled the coffers of general partners,
which raised $10.7 billion, more than double the $5.2 billion
raised in 2011. Funds from GSO Capital Partners, Prudential Capital
Group and Crescent handily closed on more than $1 billion of
capital each during the year.
The maturing secondary market appeared to provide a bit of
liquid courage to investors during 2012. As industry executives
predicted another record year of secondary sales, limited partners
poured more than $21 billion to funds in Europe and the U.S. More
than $9 billion of that was raised by just three European funds,
from AXA Private Equity, Coller Capital Ltd. and Partners
Group.
But for the fund-of-funds market, it was a much more sobering
story, as LPs continued to eschew fees and advisors continued to
present an alternative to smaller investors. Although fundraising
climbed in 2012 in Europe compared with 2011, it was still the
third-worst fundraising year for the asset class since 2003, during
the aftermath of the tech-wreck.
Similarly, in the U.S., funds of funds raised $4.6 billion, a
53% drop from the $9.8 billion raised during 2011, making 2012 the
worst fundraising year in more than a decade.
Write to Hillary Canada at hillary.canada@dowjones.com
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