2013 could be the best year for global private equity fundraising since 2009, according to Palico.com, an online platform that connects Limited Partners (LPs) and General Partners (GPs). (Listen to our interview of Palico’s founder Antoine Dréan here)
Some 130 private equity funds closed with value slightly more than US$69 billion during the first quarter. Among that, buyout funds took the lion’s share of volume, nearly doubling its fundraising to about US$34 billion, according to Private Equity International.
Some notable funds include Silver Lake Partners’ US$10.3 billion technology-focused fund, and US$3.5 billion KPS Special Situations Fund IV. StepStone Group (Listen and watch our interview with StepStone CEO Monte Brem here) raised US$100 million more than its US$350 million target for its latest secondaries vehicle.
The private equity industry is burning through the bulk of the remaining dry powder faster than before. The value of private equity deals announced in the first quarter of 2013 rose 16 percent to US$114 billion. Leveraged buyout deal values doubled to US$55 billion.
As dry powder is used or expires, LPs are increasing capital allocations available for new private equity commitments. On average, large U.S. public pension funds increased their allocation to private equity to 9.7 percent this year, up from 8.3 percent in 2012, according to Palico.
While fundraising is on the rise, capital is going to fewer GPs. In 2012, 466 private equity funds closed with an average fund size of US$579 million. While in 2011, 513 funds closed with an average size of US$448 million.
The reason may be that the number of private equity funds are increasing rapidly with greater diversification of geography, specialization and vehicle structure. On the other hand, LPs have less time and resources to learn about smaller or less-established funds.