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Fundraising may be tougher in the second half than the first, says PitchBook’s full report
Distribution of PE in the United States of the American market published on April 11. “The current fundraising demand of GPs simply exceeds the ability of LPs to provide capital,” the authors write. Several factors are at play: (1) mega funds are closing at significant levels, (2) fund withdrawals have shortened and fundraising frequency has accelerated, and (3) the number of funds in the market is at an all time high.
To illustrate the first of these points, PitchBook reports that nine funds seeking $20 billion or more are raising or have already closed in 2022. Prior to this year, only seven funds of this size had ever raised.
Solutions to the strain on LP capital budgets are on the horizon, including larger allocations to insurance companies and more serious expansion initiatives at retail. However, these are multi-year campaigns and are unlikely to resolve demand in 2022-2023.
From our perspective, this setup is likely to fuel the trends we’ve already covered, including (1) a robust secondary market as LPs seek to unlock cash and recycle capital sooner, as well as ( 2) growing LP interest in portfolio finance solutions to enable capital deployment ahead of distributions, and (3) accelerating GP interest in asset-based finance to bridge any potential backlog in exits due to market volatility or in fund raising due to capital raising bottleneck.
The full PitchBook report is available here subject to registration.
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