PE ac­tiv­ity slows down in Q3: re­port

Mint Asia ST - - News Dealstreetasia - B Y TA NU PA NDEY Pri­vate eq­uity fund-rais­ing in Q3 2017 (by pri­mary geo­graphic fo­cus)

Pri­vate eq­uity fund-rais­ing ac­tiv­ity slowed glob­ally in the third quar­ter of 2017 with 181 funds clos­ing in the pe­riod, rais­ing about $95 bil­lion com­pared to a record $138 bil­lion in the pre­vi­ous quar­ter, ac­cord­ing to a Pre­qin re­port.

How­ever, the slug­gish quar­ter should not be much of a con­cern with ag­gre­gate cor­pus raised this year so far al­ready higher than 2016.

“With a record fund-rais­ing quar­ter seen in Q2 2017, it was un­sur­pris­ing that mo­men­tum did not con­tinue into Q3: fundrais­ing ac­tiv­ity is his­tor­i­cally lower in the third quar­ter of the year, with many man­agers choos­ing to close their ve­hi­cles in the fi­nal quar­ter. De­spite this slow­down, 2017 is still on track to see fund-rais­ing lev­els sur­pass 2016 to set a new post-global fi­nan­cial cri­sis record,” Pre­qin said in its Q3 2017 Fund-rais­ing Up­date on 3 Oc­to­ber.

Ag­gre­gate cap­i­tal raised in Q1-Q3 of 2017 had in­creased to $338 bil­lion com­pared to $286 bil­lion raised in Q1-Q3 of 2016.

If fund-rais­ing mo­men­tum con­tin­ues, 2017 could not only sur­pass 2016, but may well be within reach of the all-time an­nual pri­vate eq­uity fund-rais­ing record of $415 bil­lion set in 2007.

In­ter­est­ingly, the last quar­ter also saw the largest pri­vate eq­uity fund ever be­ing closed, the Delaware-in­cor­po­rated Apollo In­vest­ment Fund IX that raised $24.7 bil­lion to be in­vested in North Amer­ica and Western Europe. This fund rep­re­sented around a quar­ter of to­tal fund-rais­ing for pri­vate eq­uity dur­ing the last quar­ter.

In Asia, there are three mega pri­vate eq­uity funds in the mar­ket—softbank Vi­sion Fund with a tar­get of $100 bil­lion, China Struc­tural Re­form Fund tar­get­ing CNY 350 bil­lion and China state-owned Cap­i­tal Ven­ture In­vest­ment Fund tar­get­ing CNY 200 bil­lion, the Pre­qin up­date noted.

Dur­ing the third quar­ter this year, 30 pri­vate eq­uity funds in Asia closed af­ter rais­ing an ag­gre­gate of $9 bil­lion. No. of funds closed 100 90 80 70 60 50 40 30 20 10 0 North Amer­ica Ag­gre­gate cap­i­tal raised (in $ bn)

Dip in PE ac­tiv­ity


“Although pri­vate eq­uity has seen a dip in fund-rais­ing lev­els this quar­ter, over­all the as­set class is still see­ing strong lev­els of in­vestor com­mit­ment. In fact, pri­vate eq­uity is set­ting a lot of records: dry pow­der has hit suc­ces­sive highs ($942 bil­lion as at Septem­ber 2017), record num­bers of funds have come to mar­ket, and Q2 was the high­est quar­terly fund-rais­ing to­tal ever seen for the as­set class,” noted Christo­pher Elvin, head of pri­vate eq­uity prod­ucts at Pre­qin.

“How­ever, with an in­crease in the num­ber of mega funds com­ing to mar­ket and rais­ing cap­i­tal from in­vestors, emerg­ing fund man­agers will have to work even harder to ap­peal to in­sti­tu­tions and at­tract cap­i­tal,” he pointed out.

Glob­ally, 267 pri­vate cap­i­tal funds—pri­vate eq­uity, pri­vate debt, real es­tate, in­fra­struc­ture and nat­u­ral re­sources—had se­cured a com­bined $150 bil­lion—a sub­stan­tial to­tal, but nonethe­less some way off the $204 bil­lion raised by funds closed in Q2. This num­ber for Q3, how­ever, may rise by up to 10% as more in­for­ma­tion be­comes avail­able, but it seems likely that this quar­ter will come to rep­re­sent a draw­back from the re­cent fre­netic pace of ac­tiv­ity.

With re­gard to real es­tate fundrais­ing, the closed-end pri­vate real es­tate in­dus­try saw 38 ve­hi­cles close in Q3 2017, rais­ing an ag­gre­gate $20 bil­lion in in­vestor com­mit­ments. Among the funds, Car­lyle Realty Part­ners VIII was the largest fund to close in the quar­ter at $4 bil­lion, just over half of the largest fund raised in Q2, Black­stone Real Es­tate Part­ners Europe V, which closed at $7.8 bil­lion.

As at Septem­ber 2017, dry pow­der avail­able to real es­tate man­agers stood at $243 bil­lion at par with the last quar­ter. Look­ing ahead, there are 569 pri­vate real es­tate funds in mar­ket at the start of Q4 seek­ing a to­tal of $185 bil­lion from in­vestors, ac­cord­ing to the re­port.

The pri­vate eq­uity-backed buy­out in­dus­try saw 953 deals worth an ag­gre­gate $92 bil­lion in the third quar­ter this year, the deal ac­tiv­ity be­ing on par with that of the pre­vi­ous quar­ter, ac­cord­ing to the data pro­vided by Pre­qin.

Although deal value in Q1 2017 was the low­est since 2012, due to the strong deal ac­tiv­ity in Q2 and Q3, it looks as though 2017 as a whole re­mained on course to record ag­gre­gate deal val­ues sim­i­lar to 2016, it said.

In fact, ag­gre­gate deal value in Asia had in­creased, and was around $3 bil­lion less than that of North Amer­ica buy­out deal value. The jump in Asia deal value was mostly due to the two largest deals be­ing an­nounced in the re­gion, worth a com­bined $30 bil­lion.

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