December 21, 2015
Interviewed by: Privcap
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Fundraising: Distributions Drive Another Strong Year

Private equity industry experts from EY, FFL, and Eaton Partners highlight the key trends and drivers of the fundraising market in 2015.

Private equity industry experts from EY, FFL, and Eaton Partners highlight the key trends and drivers of the fundraising market in 2015.

Fundraising: Distributions Drive Another Strong Year
2015 in Review

Peter Witte, EY: In 2015, we saw a very active years for private equity fundraising. PE firms are on track to raise about $500 billion this year, which is basically what they did last year and the year before that. This is being driven by a couple of things: the exit markets have been very active—that’s driving distributions back to the LPs. So, a lot of that money is being reinvested back into the asset class.

Jeffrey Eaton, Eaton Partners: It’s been a great year for exits. When that happens, generally LPs reinvest that money. And I would venture to bet that there’s a good correlation between the GPs that are having success in fundraising in being the GPs that have been the ones distributing capital back to their investors.

Chris Harris, FFL: Our Fund 3 was $1.5 billion; Fund 4 is $2 billion. Yes, we were pleased that the LPs, both existing and a bunch of new ones, supported our efforts. Now, we’re busy looking for new opportunities to invest in.

I was very impressed with how thoughtful the LPs were in diving into the portfolio and asking really good questions about the existing portfolio. Most of the discussions were not them asking questions and just giving information. It was a real dialogue back and forth.

Witte: So, you have a lot of capital that’s increasingly being funneled to a smaller pool of larger funds. That was reflected in the average fund sizes this year—average fund sizes were about $700 million in 2015. That was a new record, by far.

Fundraising is very high right now, where new deal activity is steady, but not overwhelming. That’s driving dry powder for record levels.

Buyout firms have about $475 billion in dry powder right now. That’s a new record by far and, when you include other asset types like venture capital or real estate, growth capital and everything else, that figure climbs to about $1.3 trillion. So, there’s a lot of money sitting on the sidelines that’s waiting to be invested right now.

Eaton: Valuations are high now in a lot of different industries—not everywhere, but in a lot of different industries. So, whenever you’re in an environment like that, LPs have more pause about, “Do I really want to plow my money back in at these valuations?” Even though distributions have been great and fundraising’s been great, I would say there’s probably still some money on the sidelines looking to get back into managers.

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