The private equity funds industry globally raised a record $453 billion from investors in 2017, leaving it with more than $1 trillion to pour into companies and new business ventures, data from industry tracker Preqin.
The figures underscore the extent to which large institutional investors, as well as family offices, are placing a growing portion of their money with leveraged buyout firms, venture capital groups and private equity funds, which are promising returns that beat the wider stock market.
The capital raised in 2017 surpassed the previous landmark of $414 billion set in 2007.
However, there were a quarter fewer new private equity funds launched last year than in 2016, with fundraising boosted by so-called mega buyout funds, defined by Preqin as having assets of at least $4.5 billion.
Chief amount these funds was Apollo Global Management LLC’s $24.6 billion Investment Fund IX, the largest private equity fund ever launched.
The buoyant fundraising market has fostered fierce competition for deals to put investment capital to work, driving up acquisition prices that can erode potential returns.
“Entry prices for assets remain very high, and with so much available capital competing for deals, this will only increase the challenge for fund managers looking to deploy capital in 2018,” a Preqin analyst wrote.
Private equity firms are also showing an increasing appetite for taking non-controlling positions in companies, which expands the field of possible investments.
In addition, firms are making more investments outside of the United States, while putting a greater focus on improving the operational performance of portfolio companies, which should increase their re-sale value.
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