Bullish U.S. general partners expect fundraising boom to continue

Mar 2 2018 | 5:17pm ET

A significant proportion of United States general partners (GP) expect their next fund to be twice the size of their previous or current fund, demonstrating the continuing bullish outlook for private equity fundraising in 2018, according to new research from Investec Fund Finance.

In a survey of 292 private equity professionals around the world, about 24% of senior respondents from U.S. firms expect their next fund to be at least twice the size of their current or previous fund. An additional 42% expect their next fund to be more than 25% larger than their last or current fund.

Firms’ bullish outlook follows a number of years characterized by a highly favorable fundraising market as institutional allocations to private equity have increased with investors struggle to maintain returns in more traditional asset classes.

The positive outlook for fundraising is higher than in other regions with only 4% of UK firms, 9% of mainland Europe and 13% of firms based in the rest of the world expecting to double the size of their current or previous fund.

Devin Mathews, Partner at ParkerGale said in s statement, “There is a considerable weight of LP money chasing US funds that have performed well. Much of it is backing sector or regional specialists to build out their teams and, given that many of these funds will have been investing fairly modest amounts, it is not surprising to see the fund sizes increase so rapidly, in many cases.

The majority of U.S. based respondents (67%) also expect to reach their first close within six months with 28% expecting to reach first close in just three months. On average, U.S. respondents expect to take 7.2 months to reach first close, slower than the UK, which stands at 6.7 months but faster than respondents based in Mainland Europe and the rest of the world, which stands at 8.2 and 9.7 months respectively.

Other main points from the survey include the following:

  • A large portion of U.S. respondents expect that their firm will explore new strategies in the next two years. Almost half (48%) expect that their firm will consider investing in new assets classes such as credit, while half (50%) anticipate that their firm will expand into new geographic markets.
  • The appetite in the United States to provide new products to limited partners is also significantly higher than that of mainland Europe where only 28% of respondents anticipated their firm exploring this avenue.

The survey consisted of 292 private equity professionals, conducted by MJ Hudson, in the UK, Mainland Europe, North America and the Rest of the World, and 103 respondents were in North America.


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