Brookfield closed its fifth flagship PE fund on $9 billion on Monday, tipping US totals into the all-time-high territory. (Though the firm is based in Canada, its private equity arm is run out of its New York office.) In total, US buyout funds have already raised north of $246 billion in 2019, according to PitchBook data—and the year's not over yet:
2017 previously held the record for US PE fundraising, bringing in approximately $238 billion. Before that, pre-recession 2007 had secured the most capital, with a total of about $235 billion raised. Fundraising plummeted in the recovery years after, hitting a nadir in 2010 with just $59 billion raised by PE firms.
One possible explanation for the boom could be that general partners have a sense of urgency to raise funds before a potential economic downturn. The new record begs the question: Have we reached another economic peak?
Not necessarily, according to PitchBook analyst Wylie Fernyhough.
"A lot of people have been talking about how current conditions mirror the prior peak since at least 2014 and every year things keep on rolling," he said. "I think PE firms are trying to amass capital because they can, not necessarily because they predict some sort of huge crash in prices like we saw during the global financial crisis. General partners want to make money—for their limited partners and themselves—and they'll raise as much as they can up to the point that they can still deliver on performance."
And if the stock market is any indication, investors remain optimistic. The S&P 500, Dow and Nasdaq index trifecta all closed on record highs this week.
Big wheels keep on turningThe ascent of outsized funds also helped drive the fundraising peak. US PE funds of at least $5 billion accounted for over half of all fundraising through the third quarter of 2019, marking a record over the past decade, according to PitchBook's 3Q 2019 US PE Breakdown.
In September, Blackstone raised $26 billion for its eighth flagship fund—the largest private equity fund to date. And in June, Boston-based Advent International closed the second-largest fund of the year, with $17.5 billon committed to its ninth global private equity vehicle. The fundraising surpassed its $16 billion target.
The phenomenon underscores the relative ease by which general partners have garnered funding lately, as limited partners continue to flock to lucrative private markets. To that end, limited partners are allocating more and more capital to buyout firms. It's an increasingly popular way for investors to put massive amounts of capital to work.
And there's a good chance 2019 may end on an even stronger note. Los Angeles-based Platinum Equity is nearing the $10 billion target for its fifth flagship buyout fund, with The Wall Street Journal reporting that it's expected to close before year's end. Additionally, Dyal Capital Partners and Blackstone are targeting a combined $13 billion for their own GP stakes funds, which are both expected to close before 2020.
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