Big Private Equity Funds Gobble Up Most Money

The private equity sector has recovered this decade, with fundraising especially strong in 2013 when aggregate capital raised peaked at some $505 billion.

But 2013 was a year of stark division between the fundraising efforts of first-time fund managers and their more established counterparts, according to new research by Preqin, an alternative investments data provider.

Preqin’s analysis showed that the top 30 fund managers have raised an aggregate $1.2 trillion in private equity funds in the last 10 years.

So far this year, the large, longer-established private equity fund managers have benefited most from the positive climate. During and following the uncertainty of the global financial crisis, investors preferred to allocate their capital to bigger, more experienced managers.

The top 30 fund managers — classified by the amount of capital raised in the last 10 years excluding separate accounts — have accumulated a significant amount of the capital from institutional investors, while first-timers have continually struggled to attract such investments.

For funds closed in 2013, the disparity was greatest, with $171 billion (34%) represented by the fundraising efforts of the top 30 managers alone, the highest proportion of aggregate capital the group had accounted for in the period from 2008.

Year to date, the struggles of first-time funds in 2013 appear to have lingered. Maiden funds make up only 6% of capital raised by funds that have closed so far this year.

However, for private equity funds currently in market, first-time ones account for a much higher proportion, 21%, of all capital sought.

According to Preqin, this indicates that while debut vehicles generally have more trouble than established ones in securing investor commitments, it has not deterred first-time funds managers from targeting substantial amounts.

The Elite Five

The top five private equity fund managers are long-established brand names, diversified in strategy and in the geographies they target for investment.

Blackstone Group holds the top spot in the Preqin study, with $119.3 billion raised since 2004 (excluding their separate account mandates), followed by Goldman Sachs, which established its buyout and growth-focused private equity arm in 1986, with $110.5 billion.

Carlyle Group, which ranks third with $81.2 billion, has successfully raised dozens of private equity vehicles and is currently on the road with 10 funds targeting $15 billion.

In fourth and fifth place are TPG, with $62.6 billion, and Kohlberg Kravis Roberts, with $60.9 billion. Predecessor vs. Successor Funds

Carlyle’s most recently closed vehicle, Carlyle Partners VI, raised $13 billion in its November close, surpassing its original target of $10 billion.

Though impressive, Carlyle Partners VI fell short in fund size of its predecessor Carlyle Partners V, which launched in February 2007 targeting $15 billion and closed in December 2008 on $13.7 billion.

Preqin said these figures and dates highlighted the effect the surrounding economic market had on general partners’ fundraising efforts.

Following a time of economic turmoil, such as the decline of the financial markets from Q3 2007, Preqin said, fund managers would understandably choose to moderate the target size of their follow-on vehicles.