While macroeconomic tensions and plummeting valuations in other parts of the world are placing a damper on deal activity, the private equity fundraising industry in the United States seems to be unhindered by all this global volatility. In fact, right now US private equity companies are experiencing one of the most crowded markets in recent history.
Between January and June 2022, private equity firms in the United States managed to raise no less than $176 billion. If this pace could be sustained until the end of the year, the industry might exceed last year’s total of $340 billion.
With the fundraising market remaining quite congested, some of the biggest GPs have started to prioritize relationships with clients that have a proven track record. This means that the bigger, well-established PE companies are currently in a better position to be successful with their fundraising efforts.
With many firms at this stage already having committed all their PE investment funds for 2022, quite a few of them have now extended the final close on funds to the first part of next year to enable GPs to tap into dollars that were originally allocated to 2023.
The second quarter of this year saw a number of mega-funds such as KKR ($19 billion) and Advent International ($25 billion) close. And The Wall Street Journal is well on track to close the biggest property fund in history before the end of 2022. Blackstone, meanwhile, could also wrap up its $30.3 billion fund before the end of the year. If the current trend continues, mega-fund values might set a new record this year by exceeding last year’s amount of close to $150 billion.
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Slowdown In Asian PE Fundraising
In Asia, meanwhile, PE equity fundraising is unlikely to match last year’s record levels as investors struggle with global uncertainty and volatile markets. In the first half of this year, total PE funding dropped by no less than 64% compared to the same period in 2021. Between January and July 2022, only $18.5 billion could be raised. At this stage, it looks unlikely that last year’s total of around $41 billion will be reached. In 2021, the biggest Asian PE fund was KKR’s $15 billion buyout vehicle. So far in 2022, the biggest one was Primavera Capital’s fund of $4 billion.
It’s not only Asia that is experiencing a slowdown in PE funding this year. Other parts of the world are going through similar experiences. The exit environment has become more challenging and the intervals between fundraises have become shorter.
According to Bloomberg, both the Carlyle Group and Apollo Global Management have so far experienced delays with raising their new buyout funds. Jinny Choi, Pitchbook’s Private Equity analyst, added that although so far the mega-funds haven’t had a problem with fundraising, they were now seeing some major firms also starting to experience difficulties.
The MD of Flexstone Partners, Kit Jong Tan, however, believes that the slowdown in Asia has so far not had a major impact on dealmaking volumes in Asian buyout markets. In an email he wrote to PitchBook, Tan said that in spite of the adverse macroeconomic conditions, the PE market in Asia has remained fairly resilient during the first half of 2022.
Private equity investors who are targeting this part of the world still have large amounts of capital at their disposal. At the end of 2021, funds that focus on the Asia-Pacific region held ‘dry powder’ reserves of no less than $650 billion. These highly liquid, low-risk funds are kept as reserves, ready to be used in an emergency or to invest in an opportunity that suddenly arises.
The Bottom Line: The Private Equity Market in the US Is Alive and Well
Although the private equity market in many parts of the world is going through a tough time, the US is well on its way to notching up record levels of PE investments this year. As always, however, the companies that will be most successful in attracting investors are those with the most effective capital raise efforts and a pitch that sets them apart from the rest. This is where Pitch Deck Writer can help. Start by allowing us to take a closer look at your current draft, free.