Fundraising: Funds trickle into the market

A year ago, in the depths of the financial crisis and recession, the fundraising landscape for private equity managers was bleak. With asset values plunging, many LPs were reluctant to commit new money to private equity funds, preferring more defensive assets to ride out the storm. Those funds still in the market were regularly extending their fundraising period, with several forced to close below target.

Early 2010 is looking considerably more optimistic for the industry, with several funds breaking their targets. HitecVision's most recent vehicle, HitecVision Asset Solutions, broke its $320m target by $100m with just four months of fundraising and succeeded in attracting new institutional investors. Polaris Private Equity III beat its target by €15m, raising a total of €365m and attracting considerable interest from international investors. Phoenix Private Equity has also announced it has closed its most recent fund, Phoenix Equity Partners 2010, at its hard cap of £450m.

While the market may be a long way from the multi-billion dollar funds raised before the financial crisis, these vehicles are still substantial in size. After an extremely tough few years for fundraisers, it seems investor appetite for private equity is on the up. However, while stock markets made a significant recovery at the end of last year, which may have prompted many LPs to start reconsidering their private equity allocation, they have faltered in recent months over the debt crises in Greece and elsewhere.

It is not yet clear whether this recent spate of activity is the start of a broader recovery in private equity fundraising, or simply a blip following the staggering recovery in asset values during late 2009. While this stream of successful fundraisings may not turn into a flood for some time, the industry will be hoping the cash keeps flowing despite continued problems in the global economy.

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