By Maximilian Clarke
An overwhelming majority of 84% of private equity professionals believe their firm will be engaged in fund raising activity over the next 12 to 24 months, according to a new study1 by Investec Fund finance.
However, underlining the increasingly competitive fundraising environment, on average respondents predicted that 30% of fund raisings by UK and European based general partners (GPs) will fail to get off the ground with one in five suggesting the percentage could be at least 40%.
Despite the level of competition for capital, 39% of GPs representing firms with fund sizes ranging from under £250 million to over £2 billion, predicted that their next fund will be larger than their current fund. Only 13% said it will be smaller while most respondents (44%) believed it would about the same size.
The research comes as funds worth an aggregate €7 billion2 are set to return to the market before the end of the year and industry professionals concede that funds are being forced to compromise on investor demands, particularly in light of the threat that investors may have to reduce their allocations in 2012 following a revaluation of their investment portfolios.
“While this research suggests there will be a tremendous amount of fundraising over the next two years GPs acknowledge that in this harsh environment, many won’t be successful," Simon Hamilton, Investec Fund Finance. "Yet GPs remain bullish about their own firm’s fund raising prospects given how many believe they will be able to raise a fund that is either the same size of larger than their existing one.”
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