Skip to main content
subscribers only

Getty Images/iStockphoto

No matter how you slice the data, it's clear that private equity funds are finding it much more difficult to raise money.

First there's a drop in the total amount raised, falling to $67-billion (U.S.) globally in the first quarter of 2013, according to Preqin, the lowest amount in about a year and a half.

Then there's the length of time it's taking each fund to reach their final closing date. For the funds that closed during the first quarter, the average fundraising period was 18.2 months, which ties the record length since 2006.

It's an especially tough market for first-time fundraisers. According to Preqin's stats, only $4-billion of the $67-billion raised last quarter came from those looking to start new funds, a far cry from the $28-billion invested in new funds in the second quarter of 2008.

Of course, some deals are still getting done. Encap just raised a $5-billion natural resources fund, and Brookfield just closed Brookfield Capital Partners III, the biggest fund raised in Canada since 2010. So there's some hope.

But the industry is wrestling with a central issue: how do you raise money from investors when your returns from your funds raised between 2006 and 2008 are so poor?

Case in point: Apax Partners' €11.2-billion fund from 2007 has posted a net internal rate of return of only 3.28 per cent as of June 30, 2012, and in late March Reuters reported that the buyout firm would slash about a tenth of its investment professionals.

The industry can put on a brave face, but everyone admits these are challenging times. As the New York Times reported, Henry Kravis recently spoke at a Goldman Sachs conference and acknowledged that "raising capital is tougher than it ever was."

(Tim Kiladze is a Globe and Mail Reporter.)

Return to Streetwise home page.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 7:00pm EDT.

SymbolName% changeLast
GS-N
Goldman Sachs Group
+0.59%417.69

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe