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Private Market Investors Break New Fundraising Records, Raise Largest Vehicles Ever Recorded

August 16, 2017

LPs Remain Confident in Asset Class, Committing Over $240 Billion to PE and VC Funds in North America and Europe as of August 2017
 
SEATTLE – August 17, 2017 – On the heels of a stellar 2016 for private market fundraising, PE and VC investors in North America and Europe raised record-breaking levels of capital so far in 2017, according to PitchBook’s 2017 PE and VC Fundraising report. Just over half way through the year, investors in both asset classes raised the largest vehicles of all time, with Apollo’s $24.7 billion PE buyout fund, as well as New Enterprise Associates $3.3 billion VC fund. General partners around the world have been able to stockpile hefty investable sums as private equity and venture capital continue to generate favorable returns and outperform other strategies such as public equities. However, the levels of available capital could have an adverse impact on prices, leaving dealmakers in a risky position.
 
“To say private market fundraising has recovered from its financial crisis struggles would be a significant understatement, and neither asset class has shown any signs of slowing,” said Kyle Stanford, analyst at PitchBook. “While LP’s remain confident in the asset class, the overflow of available capital could present issues for investors. Too much capital chasing too few investment targets could further drive up valuations and create a more expensive landscape for all. Time will tell if PE and VC returns will be impacted.”
 
PE Fundraising Returns to Pre-Recession Levels 
Private equity firms in North America and Europe are raising more capital than at any point since the global financial crisis. Through August 1, 2017, investors raised $212.61 billion across 214 vehicles, pacing for a 24% increase in value over the already-stellar 2016. Success on the fundraising trail is driven by several factors including PE’s continued outperformance of public markets, unprecedented low yields on credit, lackluster performance by other alternatives such as hedge funds, and strong recent cash flows, which have encouraged LPs to recycle capital back into the asset class. 
 
Some of the world’s largest PE funds ever recorded were raised this year, the largest being US-based Apollo’s $24.7 billion buyout fund. Just two months earlier, CVC Capital Partner’s €16 billion fund set the record for Europe’s largest buyout fund. While mega funds are trending – PE funds with at least $5 billion in commitments have accounted for one half (49.8%) of all capital committed to the asset class this year – middle-market funds still share half of the fundraising pie. There were 105 funds closed through August 1st with between $100M and $500M in commitments, representing 50% of all PE funds closed, the highest since 2006.
 
Dry powder levels for North American and European PE funds continued to climb with $739 billion as of year-end 2016, up slightly from $733 billion in 2015. The available capital, coupled with increased competition, is expected to put upward pressure on pricing for buyout targets.
 
VCs Focus on Raising Larger Funds as LPs Consolidate Commitments
Venture fundraising in Europe and North America also experienced upward momentum in the first half of 2017 and is on pace to be the fourth consecutive year with more than $40 billion raised across all vehicles. As of August 1st, investors raised $27.5 billion across 165 funds, with median fund sizes sitting at $84 million, more than triple that of 2012 ($28 million). Fund sizes have continued to swell at the expense of the number of funds, as LPs look to consolidate commitments across fewer managers. The proportion of all funds raised with between $100 million and $250 million in commitments almost doubled from just 15.2% in 2012 to nearly 28%. Meanwhile funds closed with less than $50 million decreased substantially during the same period – down from 60% to 34% this year, the lowest percentage in over a decade.
 
Similar to its PE counterpart, VC investors also broke fundraising records in 2017. In June, US-based New Enterprise Associates raised the largest VC vehicle ever with its $3.3 billion fund. Overseas, European investors closed two vehicles with more than $750 million, making it the second time more than one such fund has been closed in a single year. What’s more, the increased interest in the asset class has created more opportunities for first-time fund managers. These investors raised more capital in the first seven months of 2017 than full year totals for 2012-2014. California alone represents 52% of total first time funds and strategies were largely geared towards technology niches, like, Fintech, SaaS, Biotech and Artificial Intelligence.
 
While VC dry powder ($119 billion) has declined slightly from the last report, capital overhang is nearly $4 billion higher than any year in the past decade. Additionally, AUM of the venture industry has grown 47% since 2008 to reach $441 billion. Of that total, 73% is accounted for by unrealized value of portfolio holdings. With fewer exits and excess capital to deploy, AUM will likely continue to grow.
 
Additional findings in this report include:
  • PE Fundraising Overview
  • PE Fundraising by Size
  • PE Capital Overhang
  • VC Fundraising Overview
  • VC Fundraising by Size
  • First-Time VC Funds
  • Venture Capital Overhang
 
Download the full report here.
 
About PitchBook
Founded in 2007, PitchBook is a data provider that tracks every aspect of the private and public markets, specializing in venture capital, private equity and M&A. More than 10,000 professionals access PitchBook’s data through the company’s award-winning software products. PitchBook is a Morningstar company with offices in Seattle, New York and London.
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