Garrett James Black April 18, 2016
Although there's a fair amount of quarterly variance in median PE fund sizes, there has been a distinct trend upward since the end of 2013, with the closing quarter of 2015 cresting at just over $300 million across all PE fund types.
Buyout funds have trended even larger as of late, avoiding a quarter-over-quarter slump in 1Q 2016. Through the end of March, 2016 saw 104 PE vehicles close worldwide, a tally that was roughly in line with past quarters yet down from the heights of 2013.
As the figures above are global medians, it seems clear that the industry as a whole has been aiming higher when it comes to fundraising targets. This is well in line with current PE fundraising trends, both observed and anecdotal: With a growing number of firms courting LP dollars, strategies are growing more niche and sector-specific as GPs seek to demonstrate untapped opportunities or their particular areas of expertise.
LPs, meanwhile, have at the very least been seeking to maintain their allocations to the PE asset class on the whole, looking to commit to larger, more-proven fund managers. Especially in today’s dealmaking environment, it’s unsurprising to see larger fund closes as risk-averse LPs subscribe to vehicles of bigger fund managers, which by and large tend to outperform their smaller peers.
The concentration of buyout fund sizes around $300 million speaks to not only the characteristics of the PE firms raising recently but also that particular strategy’s popularity, most likely generated by more and more fund managers looking toward the core and upper bounds of the middle market for best-valued opportunities.
Note: This column was previously published in The Lead Left.