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PE fundraising falls by nearly $100bn amid investor crunch

A total of 1,520 funds closed in 2022, raising $727.3bn between them $829.Bbn raised in 2021, according to PEI data.

Private equity fundraising tumbled by nearly $100 billion in 2022 as LPs struggled with the overweighting of private equity within their portfolios, according to preliminary fundraising data from Private Equity International.

A total of 1,520 funds closed in 2022, which raised $ 727.3 billion between them. Despite this marking a drop from the 2,278 vehicles that raised

$829.8 billion in 2021, 2022 was still the third-strongest year on record for capital raised.

The fact that 2022 was a historically strong year for fundraising did not come as a surprise to Scott Church, co-founder and partner at Rede Partners.

Investors are attracted to the asset class given its overall robustness and its ability to do well across the full fundraising cycle via skill and specialization. In particular, the fact that managers can actively influence outcomes for portfolio companies via control positions and minority influence is appealing, Church explained.

The preliminary data from PEIs 2022 full-year fundraising report suggests a smaller number of funds commanded more of the capital raised in 2022. The number of vehicles that closed last year was at its lowest level since 2016.

The market had a bumper year in 2021, with many vehicles closing, leaving fewer still in market during 2022, Church said. There are also some GPs who have pushed their fundraises from 2022 into 2023, opting to wait for a more certain macro environment.

A flight to quality is occurring in the market, although nuances remain around re-ups. "It's tough out there to get new money tickets, but re-ups are no longer guaranteed either," Church said. He added that extra scrutiny is leading to more churn as investors back market leaders in particular segments.

Buyout funds, which made up more than half of the capital raised last year, represented around one-fifth of the number of funds closed. Venture capital funds, meanwhile, made up just under half of closed vehicles, but raised just over one-fifth of overall capital.

North America-focused funds once again commanded the majority of capital raised, with $338 billion in commitments, followed by $260.6 billion for multi-regional funds. APAC-focused funds raised $64 billion, while Europe-focused vehicles raised $59.3 billion.

Advent International held the largest fund close of the year on $25 billion for its Advent International GPE X vehicle in May. By closing in the first half, it managed to avoid the fundraising crunch that was exacerbated by global volatility as the year wore on.

Thoma Bravo Fund XV took the second spot, closing on $24.3 billion in December. It was followed by KKR North America Fund XIII, which closed on $19 billion in April.

There are 4,084 private equity funds in market, seeking to raise$ 1.15 trillion between them.

Apollo Investment Fund X has the biggest target, aiming to raise $25 billion. The vehicle has raised $14.5 billion so far. It is followed by Carlyle Partners VIII with a target of $22 billion, and EQT's EQT X and EQT Infrastructure VI, both targeting $21.04 billion.

The fundraising market looks tough as we move through 2023, but Church continues to predict successes: funds with climate- and impact-focused strategies, more defensive strategies like credit, and lower mid-market strategies see demand, as do funds with a focus on healthcare and stable B2B software strategies.

The chips are still in the air when it comes to where LP appetite will coalesce in the longer term, he added.

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