Are private equity managers balancing fundraising and deployment?

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Business, Technology, Internet and network concept. Young businessman working on a virtual screen of the future and sees the inscription: Private equity © Marina Putilova /123RF Stock PhotosPrivate equity fundraising slowed in the second quarter of 2020, reaching only US$116 billion, its lowest quarterly point since the first quarter of 2018, according to Preqin’s quarterly private equity report.

Further, private equity funds are taking longer to reach targets than last year. Only 39 per cent of funds that closed in the first half of 2020 did so within 12 months, compared to 52 per cent in 2019. “Increasingly, funds are spending between 19 and 30 months in market (34 per cent in [the first half of] 2020 versus 21 per cent in 2019), indicating a need to balance fundraising efforts with fund deployment – those managers looking to take advantage of any repricing opportunities may have to be swift and scale back fundraising ambitions,” said the report.

In private equity, investors are also scaling back on the size of their commitments. “Preqin data shows that 11 per cent expect to allocate more than [US]$300 million to private equity over the next 12 months, down from 22 per cent in Q2 2019.”

And while the number of funds in the market increased between January and June, aggregate capital declined by more than US$40 billion. “This suggests that managers are recognizing a need to balance fundraising with fund deployment – the longer the wait for capital, the longer the lead time in which to deploy it.”

Within particular strategies, only secondaries, turnaround and the ‘other private equity strategies’ categories are seeing increased interest from investors, the Preqin found.

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