PE Fundraising at Its Lowest Level Since 2003

(July 2, 2010) — Private equity fundraising is at its lowest level in seven years, as buyout firms have increasingly postponed plans to raise new capital, according to a recent survey by London-based private equity research firm Preqin.

According to the survey, $41.3 billion was collected by the industry globally in the second quarter of 2010, the lowest total in seven years.

“Although institutional investors are growing in confidence following the recovery of private equity fund performance after the big drops we saw last year, fundraising remains an extremely challenging prospect,” said spokesman Tim Friedman in a statement. “Preqin’s June 2010 LP survey reveals that most investors (76%) are simply looking to maintain allocations in the next 12 months.”

Over the next 12 months, the study showed 19% of investors will be looking to increase allocations to private equity and 6% will be looking to decrease their commitment levels. In the longer term, 36% of investors expect to up allocations, revealing that fundraising will be set to increase more substantially in the second half of next year.

The study showed an uptick in the number of funds being abandoned or put on hold — there are currently 1,522 funds on their way to seeking $560 billion globally, it said, representing a significant drop from the 1,623 funds seeking $889 billion in the first quarter of 2009.

Preqin’s survey additionally found that it is taking more time for firms to raise funds. For funds which completed fundraising in 2010, the average time taken was 19.8 months, double the average time taken in 2004.

Nevertheless, Preqin said it expects improvement as the year progresses. Among firms that have been successful in raising funds recently is the Blackstone Group, whose sixth global buyout fund has been completed despite one of the toughest periods to ask investors for cash.