Despite ongoing economic uncertainty, investor appetite for private equity deals remained robust in the third quarter as private equity funds raised a total of $64 billion during the quarter, roughly 10 percent more than the third quarter of 2011. The private equity capital raise during the September quarter was however well below the $83 billion raised in the second quarter of 2012 according to data from private equity research firm Preqin.
US Focused Funds Account for 53 Percent of Q3 Private Equity Funds
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During the third quarter of 2012, a total of 122 private equity funds raised $64.1 billion. By comparison, 192 priv
ate equity funds mopped up $83.3 billion in investor capital during the second quarter. Of the $64.1 billion in private equity capital raised during the quarter, US focused private equity funds accounted for $33.7 billion or 53 percent while Europe focused funds closed roughly $14.8 billion. Private equity Coller Capital closed the largest fund in Q3 2012 raising a $5.5 billion fund to buy assets from banks and insurers.
Private Equity Fundraising Environment Remain Challenging
According to Preqin manager Richard Stus, the higher private equity capital raised in the third quarter is a result of private equities raising larger average fund sizes compared to the equivalent quarter in 2011. Stus however warns that the current private equity fundraising environment continues to be a challenge for fund managers, with the average time for private equity funds to close increasing to 16.8 months in 2012 compared to 16.2 months in 2011. The Preqin survey also found that there are 1,918 private equity funds currently in market aiming to raise roughly $797 billion, compared to 1,892 funds in June 2012 targeting $823 billion.
The Preqin survey of private equity investors found that an overwhelming eighty nine percent of investor respondents intend to either maintain or increase allocations to private equity o
ver the next 12 months. The survey also found that the biggest challenge for private equity fund managers is distinguishing themselves from the record number of competing private equity funds currently on the road.
What it Means for the Job Market
The results of Preqin survey are certainly positive for the private equity job market as the funds not only raised more money in Q3 this year compared to last year but a vast majority of investors intend to at least maintain current private equity allocations in the coming year. It shows that institutional investors still remain very confident of private equity investments despite recent underperformance. But the lingering macro concerns may offset the positive impact of such favorable trends and may temper expectations for a quick turnaround in the private equity job market.
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