Private Equity Fund Raising Down at Mid-Year

According to new analysis by Dow Jones Private Equity Analyst, the first six months of 2009 saw 173 private equity funds raise $54.9 billion, 64% less than the $152.7 billion raised by 261 funds during the first half of 2008 and the lowest mid-year total raised since 2005. In 2008, private equity firms raised a total of $287.5 billion, second only to the record $343.3 billion raised in 2007, Dow Jones said in a press release.

According to Dow Jones Private Equity Analyst, leveraged buyout (LBO) and corporate finance funds continue to attract the largest proportion of capital investment. In the first six months of 2009, 73 buyouts funds raised $28.7 billion, 72% less than the $102.6 billion raised by 98 similar funds during the same period last year.

Notably missing from this year’s fund listing are “mega” funds, those with targets of $8 billion or more that were so popular during the private equity boom from 2006 to 2008, the announcement said. In 2009, just three funds reported investment goals over $8 billion and none had reached or surpassed their minimum targets by the halfway mark.

The difficult economy has many cash-strapped pension funds, endowments and foundations looking to sell their stakes in private equity funds. Secondary funds, which pool capital from investors to purchase existing stakes in private equity funds — often at a discount — have seen a big boost in investor interest.

According to Dow Jones Private Equity Analyst, 18 secondary funds have raised $13.9 billion in capital, setting a new annual record for the fund category with six months left in the year.

The venture capital industry saw a 63% decline in fundraising in the first half of 2009. Fifty-one venture funds raised $5.1 billion during this time compared to $13.6 billion raised by in 115 such funds in same period last year – marking the worst first-half total for venture capital investment since 2003 when 34 funds raised $2.2 billion.

The first half of 2009 saw $1.3 billion invested in seven mezzanine funds, down 95% from the record total raised a year ago, and $5.9 billion put in 23 funds of funds, down 38%.

The largest fund closing of the first half of 2009 belongs to Hellman & Friedman, according to the press release. It raised $6 billion for its Hellman & Friedman Capital Partners VII LP buyout fund, which is still open with a $10-billion target.