Private equity funds eyeing record $635bn

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Private equity funds are seeking to secure a record $635 billion in investor capital as demand for the asset class goes through the roof, new research from Preqin suggests.

Globally, 1,908 private equity funds are in market in Q2 2017, seeking a combined $635 billion, up from 1,834 vehicles that were targeting $526 billion at the start of 2017.

Preqin said the market is fat with a number of mega funds, including the Softbank Vision Fund. Targeting $100 billion, if successful it will become the largest private equity fund of all time.

Also seeking sizeable amounts are the China state-owned Capital Venture Investment Fund ($29 billion) and Apollo Investment Fund IX ($20 billion).

Preqin’s research shows how the biggest firms dominate the private equity market, with the 10 largest private equity funds in market hunting a combined $203 billion, 32 per cent of the industry’s total.

Funds focused on North America account for more than half of all vehicles in play. Seeking a combined $336 billion, it is the most-targeted region for private equity fundraising.

However, Asia is now more popular than Europe for private equity investment. 370 vehicles are looking for $157 billion of investment to deploy in Asia.

Christopher Elvin, head of private equity products at Preqin, said while the mega funds are attracting attention, there is plenty of other activity.

“These mega funds serve to drive headline figures, but away from this the private equity fundraising market remains incredibly competitive – Q1 2017 alone saw a net increase of 74 vehicles seeking investor commitments.

“However, fund managers coming to market are targeting an investor base that is still very positive towards private equity.

In a low interest rate environment, the asset class will continue to appeal to investors looking for high absolute returns and portfolio diversification. Moreover, because of the accelerated rate of distributions, investors are looking to increase their exposure to the asset class.

“It is therefore possible that the trend of capital concentration among the largest funds, which can accommodate substantial commitments and are capable of investing across a wide variety of sectors and geographies, will endure.”

Vicky Williams, managing director at consultancy firm Cambridge Associates, told IPE: “There is a lot of money chasing fewer deals at the top end, which is pushing up prices.

“There are assets at the top end, of course – otherwise managers wouldn’t be raising money – but they are relying more on taking public companies private, rather than other traditional private equity deals.”

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