Private Equity Fundraising Plummets to Lowest Levels Since 2003

London, United Kingdom, October 02, 2009 --(PR.com)-- The $38bn in aggregate capital raised by funds holding a final close in Q3 2009 represents a significant drop from earlier this year, with Q3 figures equivalent to just 45% of the $84bn raised in Q2 2009. In comparison with the recent record- breaking quarters seen in 2007, the drop is even more steep – with Q3 2009 figures equivalent to just 18% of the record $208bn raised in Q2 2007.

How Does Preqin Collect Fundraising Information?

In addition to continually monitoring filings, news and press releases, Preqin maintains regular contact with all private equity fund managers with a vehicle in market, regularly calling and emailing to receive status updates. Over the past week Preqin has directly contacted over 1,500 fund managers around the world with a vehicle in market to enquire as to their fundraising status, and importantly whether they had already held, or were planning to hold, a final close in Q3 2009.

Funds in Market:

The number and aggregate fundraising target of funds in market has dropped considerably over the course of the year, which is due primarily to a slowdown in new fundraising launches, plus an increase in the number of funds being abandoned or put on hold. There are currently 1,574 funds seeking an aggregate $754bn, down from 1,624 funds seeking an aggregate $889bn earlier this year. To date in 2009, Preqin has data showing that up to 90 funds have abandoned their fundraising process – a significant increase from the 30 funds abandoned in 2008 and the 14 abandoned in 2007.

Time Taken to Close Funds:

Further evidence of the challenging nature of the fundraising market can be seen in the time it is taking for fund managers to close their vehicles. For funds closed in 2009, the average time spent in market has jumped to 18 months, up from 15 months in 2008, and 12 months in 2007.

Investor Attitudes

These fundraising statistics are clearly very poor, but they are not totally unexpected: Preqin’s August 2009 survey of 100 institutional investors shows that just 41% of LPs had made fresh commitments to funds in the first six months of the year, and these investors are, in general, investing at a much slower rate and to fewer funds than they have in the past.

Outlook for the Future

Although conditions have been extremely challenging in Q3, there is strong evidence to suggest LPs will be returning to the asset class soon. In Preqin’s August survey more than half of investors, 54%, told the firm that they expected to make new fund commitments in the latter half of 2009, and a further quarter said they expected to return to the market in 2010. Overall, investor appetite for private equity does not generally appear to have been adversely affected by the financial crisis. In fact, 30% of investors informed Preqin that they intend to increase their allocations to private equity over the longer term and a further 63% intend to maintain the existing level of their exposure. Just 6% of investors are intending to decrease their exposure to private equity over the next three to five years.

Comment:

“Historical data shows that the summer months of Q3 often represent a relatively slow quarter for fundraising in any given year. However, for the rate of fundraising to drop by nearly 70% over the course of a year is a dramatic fall, and demonstrates just how challenging it has become to raise new funds in the current climate. Many of the funds that are closing are doing so short of target, and we have seen a number of fund managers putting their fundraising efforts on hold until 2010, or abandoning them altogether for the foreseeable future.

Clearly the problem is not on the supply side – although we have seen the number of offerings on the road drop significantly over the course of 2009, supply is still outstripping demand, with the amount of capital available for new investments significantly down on recent years as institutions remain reluctant to commit to new vehicles. The question for the industry is whether current sentiment is indicative of a long-term shift away from private equity, or whether it represents a short-term hiatus. Preqin's recent survey of institutional investors in the sector would suggest that the latter is the case, with a whole swathe of significant private equity LPs readying themselves to re-enter the market in the final quarter of this year and into 2010. Nonetheless, private equity fundraising is set to remain challenging, and Preqin expect firms without a strong track record to continue to struggle in gaining commitments from a more wary investor community.”

Tim Friedman, Head of Communications, Preqin

About Preqin:

Preqin is the leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests.

Preqin has built a reputation in the alternative assets industry for providing the most comprehensive and extensive information possible. Leading alternative assets professionals from around the world rely on Preqin’s services daily, and its data and statistics are regularly quoted by the financial press. For more information, please visit: www.preqin.com

Note to Editors:

Please note that Preqin has completely replaced Private Equity Intelligence as the official company name.

· Preqin is spelled without the letter ‘U’ after the ‘Q’.

For more information, please contact:

Tim Friedman on +44(0)20 7065 5180 or tfriedman@preqin.com

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