Private equity fund raising stumbles in U.S.

U.S. private equity fund-raising slipped in the third quarter, raising concern that raising money is losing momentum.

Thanks to a strong start to the year, private equity fund-raising is set to top the $95.9 billion raised in 2010, according to Dow Jones LP Source.

Private equity funds raised $24.8 billion in the third quarter, accounting for 27 percent of the $92.5 billion raised during the first nine months of the year.

“Private equity fund-raising appeared to be on a steady flight back to the land of recovery during the first half of 2011,” said Laura Kreutzer, managing editor of the Dow Jones Private Equity Analyst. “But recent public market volatility, concerns about Europe and a heightened sense of economic uncertainty created some turbulence in the third quarter…It’s still not clear whether the industry will get back to its regular cruising altitude in the fourth quarter.”

In Europe, capital committed to private equity funds has already exceeded the 2010 total. Driven by a significant uptick in buyout fund-raising, 92 European funds raised $36.8 billion through the first three quarters, more than the $32.8 billion raised throughout 2010.

In the United States, buyout and corporate finance funds raised $66.6 billion across 139 funds during the first three quarters, a 52 percent increase in capital over the same period last year.

Throughout the sector, small and mid-sized funds continued to capture investors’ attention

But the trouble is in the secondary market, which collected $36 billion for 13 funds, a 59 percent drop from the same three quarters in 2010. The drop comes after three years of secondary funds collecting more than $10 billion annually, and general partners turned their focus from raising capital to investing it.

In the U.S. and Europe, venture capital fund-raising was cut in half after the 2008 recession and has yet to rebound. In the third quarter, 32 U.S. funds raised $2.2 billion, a 24 percent drop during the same period last year. Through the first three quarters of the year, U.S. venture fund raising was up 9 percent, but more than half of the $106 billion collected for 90 funds was committed during the first quarter.

Venture capital fund-raising in Europe is on pace to set another record low as 25 funds garnered $1.8 billion during the first three quarters, a 31 percent drop in capital committed from the same period in 2010.

Dow Jones LP Source classifies multiple fund closings separately to provide an accurate view of the fund-raising environment. For more information, go the company’s website.