For three quarters things were going well for private capital firms raising new money. Then came that ugly fourth quarter of 2008 set off by the failure of Lehman Brothers Holdings Inc. Fundraising by private capital firms fell off a cliff as 2008 limped to its end, according to new data released today by Dow Jones Private Equity Analyst.
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After two years of setting new records for
capital under management, U.S. buyout, venture capital and mezzanine investing firms were unable to keep up the
torrid pace and saw fundraising fall 18% from 2007's sky-high $325.8
billion. Surprising though, is that for most of the year, the pace of
fundraising was actually ahead of 2007. However, in the fourth quarter,
99 funds raised only $43 billion, significantly less than the nearly
$100 billion raised by 208 funds during the same period in 2007, the
data said.
While the overall totals were expected to be down, the number of new
investment funds to close is a big area of concern as only 363 funds were raised in 2008, down from 506 in
the prior year. Additionally, capital wasn't flowing into traditional
buyout or venture capital firms in 2008, but rather a surge in money
going into mezzanine funds -- which increased 351% in 2008 -- was the
main factor keeping the overall figures from reaching anywhere near those of
precredit crisis levels. Venture capital firms saw fundraising
numbers fall by 25%, while private equity firms saw a 26% decline. At
this point, even the top names are having trouble getting limited
partners to commit to writing a check. The Carlyle Group
recently closed its fifth buyout fund with only $13.7 billion, short of
its $15 billion goal, which was set when the firm launched the process
in the 2007 first quarter. -
George White
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