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A Drop in First Time Funds Among Robust Private Equity Fundraising

Danielle Fugazy | November 7, 2019

Despite having a record amount of capital for investment, private equity firms continue to raise new funds. U.S. private equity firms raised $191 billion in the first nine months of 2019, nearly as much as in all of 2018, according to a report by research firm Pitchbook.

This increased the amount raised by private equity funds by 38 percent year-on-year, even as the number of funds that raised capital fell 18 percent to 131, according to the report. Firms are raising capital to invest stateside and overseas. 

What follows is a look at some of the latest firms that have raised capital. 

Kohlberg Kravis Robert has raised its biggest-ever European fund. The fund closed with 5.8 billion. The fund will target western European companies worth between 500 million and 2 billion in industries including healthcare, financial services and retail. The firm will take majority and minority stakes. 

KKR isn’t the only firm to raise a European fund. In October, The Carlyle Group raised a whopping $7.1 billion for its fifth European fund. The fund invests in companies that have an enterprise value of 300 million to 1 billion in counties such as the Netherlands, Italy, Germany and the U.K.

Other firms are getting into the fundraising mix as well. Elliott Management Corp., a well known hedge fund, is moving in to private equity. The firm recently raised $2 billion to do private equity deals. 

Smaller firms are still raising new funds as well. RiverGlade Capital closed its debut buyout fund with $325 million in commitments. The firm primarily makes healthcare investments of between $25 million and $150 million. Garrick Rice and Danny Rosenberg founded the firm in 2017 after working together at Chicago’s Sterling Partners, which reportedly announced that year that it wouldn’t be raising a new broad-based fund.

The Chicago-based firm is one of few first-time funds to close in 2019. According to Pitchbook, it is only the sixth new buyout fund to close in 2019, which is very low considering that 32 new funds closed in 2018. 

A medley of factors—including an ambiguous financial outlook—could be behind the debut fund drop, according to PitchBook analyst Wylie Fernyhough. 

“We’ve definitely seen fewer first-time funds than last year. It may be the LPs are less willing to take risks in this uncertain environment. It may be that they’re just choosing to cull GP relationships and allocate to the Blackstones of the world. It may also be some lumpiness in the data and something that will even out later,” Fernyhough said. “I think it’s a bit of all those things.” 

Additionally, in November, on the smaller end of the market, former San Antonio Spurs superstar David Robinson is helping Blueprint Local, an opportunity zone fund, raise $50 million for a new investment fund designed to develop economically depressed neighborhoods in Texas. Also in November, NovaQuest Capital Management closed on NovaQuest Private Equity Fund with $275 million and has already started making investments out of the fund.

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