U.S. Private Equity Fund-Raising Drops Despite Increase in Fund Closings

NEW YORK, April 6 /PRNewswire/ -- During the first quarter of 2010, U.S. private equity fund-raising dipped to $17.6 billion raised by 97 funds, an 8% drop from the $19.1 billion raised by 75 funds during the same period last year, according to Dow Jones LP Source. When the most recent quarter's totals are compared to the $65.9 billion raised by 108 funds during same period in 2008 the numbers show how hard the industry has been hit by the economic downturn and credit crunch.

"The fundraising total is negligible, but the story behind the numbers is telling," Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst said. "Many commitments made during the first quarter were to funds early in their fundraising process unlike the same period last year when many closes were holdovers from 2008. We are seeing that limited partners are willing to put what they have to work, though they may not have much to invest."

Buyouts Hit Hard, Still Account for Majority of Funds Raised

Leveraged buyout and corporate finance funds claimed the majority of capital put into private equity funds. These funds raised $9.7 billion for 39 funds, a slight increase from the $9.6 billion raised for 27 funds during the same period last year. The buyout category hit this number without the benefit of a closing from a mega fund, a fund of more than $6 billion.

Distressed funds, a sub-sector of buyouts, raised $3.5 billion across seven funds, up dramatically from the $1.1 billion raised by four funds during the same period last year. Mezzanine funds collected $1.5 billion across seven funds, almost double the $821 million raised by five funds in the first quarter of 2009.

"Specialist strategies, such as distressed and mezzanine, had a healthy start to the year," said Ms. Rossa. "The move toward more targeted strategies allows limited partners to dive into sectors they think have greatest potential for returns and diversify what are often buyout-heavy portfolios."

Secondary funds are one specialist strategy that may have hit its peak. In the most recent quarter, secondary funds raised $1.2 billion. These funds raised a hefty amount capital in 2009 — $3.8 billion during the first quarter and $17 billion throughout the year — and are now looking to deploy it.

Venture Fundraising Enjoys a Small Renaissance

Venture funds raised $4.1 billion for 34 funds during the first quarter of 2010, a 41% increase from the $2.9 billion raised for 25 funds during the same period last year. The venture industry has been faring better than most over the last year. While venture is coming off a 6-year fundraising low in 2009, venture funds were down 53% last year, significantly less than the 68% drop experienced by the private equity industry overall. For an in-depth analysis of venture capital fundraising, visit http://bit.ly/1QUSVC.

The two biggest closes in first quarter of 2010 came from Oaktree Capital Management LP which held a $1.8 billion final close for its $3.3 billion OCM Principal Opportunities Fund V LP fund and a $952 million first and final close for its OCM Mezzanine Fund III LP fund.

To download additional data or graphics, visit http://bit.ly/1QUSPE. For more information about Dow Jones LP Source or Private Equity Analyst, visit http://privateequity.dowjones.com.

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SOURCE Dow Jones & Company