Monday 16 December 2019 1:28 pm

Private equity fundraising to fall in 2020 after record year, analysts predict

Private equity fundraising next year may fall below the record levels seen in 2019 as large firms shift their focus on to capital deployment, analysts have predicted. 

Firms will also try to hold on to some of their top performing assets for longer in 2020, according to a note from private equity data firm Pitchbook.

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Private Equity fundraising in Europe has already set an annual record in 2019, with $342.9bn raised by mid-November as large firms including Blackstone, Leonard Green and KKR raised record sums. 

The total sums for 2020 could drop below this mark, according to analyst Dylan Cox.

But if such a drop does occur, it doesn’t mean the sector is slowing down or that “allocations have cooled”, Cox added.

Instead, fundraising totals may fall while large firms focus on allocating the record capital raised in 2019, as well as embarking on new fundraising efforts that may not close until 2021.

“While 2020 private equity fundraising is sure to be strong when compared to almost any other year, there are currently few funds in the market targeting more than $10bn,” said Cox. 

Elsewhere in the sector, analysts are predicting private equity firms will try to hold on to their best-performing assets for longer as managers seeking extensions for holding times becomes more common. 

“Almost everywhere we look, [private equity firms] are trying to hold their winners for longer and are coming up with innovative methods to do so,” said Pitchbook analyst Wylie Fernyhough.

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An extended bull market has meant that many portfolio companies have hit firms’ financial targets – which would typically trigger a sale – but still hold more promise, according to the note. 

“We believe 2020 will be the most innovative year yet with more [firms] than ever seeking to hold part of their top assets longer and pursuing new funds dedicated to holding extended stakes in companies.” said Fernyhough.