Private capital assets under management (AUM) now stand at $4.2 trillion as of June 2015 (latest data available) and the AUM of the core private equity strategies encompassing buyout, venture capital and other closely related strategies has expanded to $2.4 trillion of this total. This growth has been fuelled by another strong year for fundraising, a rise in dry powder levels and an increase in the unrealized value of portfolio assets. This growth, however, is not without its concerns; the fundraising market is more competitive than ever and dry powder levels continue to increase and put further stress on finding attractive entry prices for assets.
As a result of the record distribution levels seen in 2014, private equity fundraising in 2015 was robust, with 689 vehicles raising $288 billion over the course of the year. While currently below 2014 levels, this number will increase as more data becomes available and it is likely that 2015 will be on a par with the total capital raised in 2014. The fundraising market is, however, more competitive than ever; there are currently 1,630 private equity funds on the road seeking $483 billion. The gap is also widening between established fund managers and emerging managers; just 8% of the capital raised in 2015 was secured by new GPs and 54% of investors surveyed at the end of 2015 stated they would not consider investing in first-time funds over the next 12 months.
There can now be no doubt that the venture capital market is in a boom period. Following on from a strong 2014, venture capital funds raised a further $47 billion in capital, which included the closing of the largest venture capital fund in history, the $3.4 billion Insight Venture Partners IX. Venture capital funds also recorded the highest one-year horizon returns (20.5%) of any strategy and venture capital deal activity reached a record aggregate level with $136 billion from 9,241 transactions. Investors have taken note of this turnaround in fortune and 36% of investors surveyed by Preqin at the end of 2015 were looking to invest in venture capital funds in 2016.
During 2015, private capital dry powder increased by $120bn. With the exception of infrastructure funds, all fund types have seen a growth in available capital, with the majority sitting in buyout funds.
Data is provided by Preqin and delivered to you by REO Capital, LLC. We hope you enjoy the data update for 2017.