PitchBook

1H 2013 Private Equity

Fundraising and
Capital Overhang
Report

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Bet ter Data. Bet ter Decisions.

Introduction
2012 proved to be another trying year for private equity (PE) firms on the fundraising trail, as
the 112 vehicles closed during the year is the lowest total since 2003. However, PE firms did have
more success raising large vehicles, pushing the amount of capital raised higher for the second
consecutive year. Still, the $113 billion raised in 2012 pales in comparison to the figures seen during
the boom years, when fundraising exceeded $200 billion per year. Several forces have contributed
to the current depressed state of PE fundraising, including lower levels of investment, somewhat
disappointing returns from many of the more recent vintages, and increased scrutiny of the PE
industry as a whole from both the public and investors.
With that in mind, limited partners (LPs) have been more discerning when making fund
commitments in recent years. Virtually all LPs now ask for more detailed reporting from their GPs
than they have in the past, including figures on specific portfolio company performance. Many LPs
have been looking to consolidate their PE portfolios by reducing the number of GPs they invest
with, and we have seen a meaningful jump in the average LP commitment in recent years as this
trend has played out. Considering the above factors, the GPs that are able to display a strong track
record and articulate a clear and viable investment strategy will have the best opportunity to attract
capital in the years ahead.
Another factor that has been dampening fundraising efforts is the massive capital overhang, which
currently sits at $348.2 billion. One of the most notable traits about the overhang is the more than
$100 billion of dry powder that remains in funds from the 2007 and 2008 vintages. These funds are
beginning to reach the end of their investment mandate, so investors may lose access to this capital
in the coming years. If and when this happens, it should free up capital for LPs to reinvest with
newer funds.
This report examines current U.S. fundraising trends from several angles to provide a holistic
picture of the current fundraising environment. We hope the charts, graphs, and analysis provide
you with better data for better decisions.
***Update to Capital Overhang Methodology: Beginning with this report, PitchBook has revised
how we calculate the PE capital overhang to reflect our current fundraising methodology. We
will no longer be including the following types of funds in the report: bridge financing, corporate
development, debt, infrastructure, project finance, and distressed debt. Any inconsistencies with
previously reported overhang numbers can be attributed to the new methodology.

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of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to
be relied upon as such or used in substitution for the exercise of independent judgment.

1H 2013 PE Fundraising and Capital Overhang Report

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Fewer funds but more capital in 12

$100

Fundraising by Quarter

132

140

115

$90

120

$80
$70

100

$60

80

$50

55

52

$40
$30

41
51

55

$20
$10
$0

29

53
38

29

29

60

45

40
22

36
31 27 34 31
23 22

29

11

40
20

$86 $71 $66 $42 $81 $73 $63 $35 $69 $36 $11 $30 $18 $17 $7 $9 $44 $20 $15 $21 $20 $37 $30 $27

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2007

2008

2009

2010

Capital Raised ($B)

2011

2012

# of Funds Closed

Source: PitchBook

Difficult fundraising environment to continue in 2013

Despite only 112 funds closing in
2012the fewest since 2003the
amount of capital raised by PE firms
increased 13% to $113 billion in 2012.
This is well less than half the amount
of capital raised annually during the
mid-2000s, but it is important to put
the fundraising number in context.
For the three-year period from 2006 to
2008, PE firms raised $722 billion but
also invested $1.68 trillion of debt and
equity. From 2010 to 2012, PE firms
only raised $264 billion, but the level of
investment also dropped a significant
39% compared to the 2006 to 2008 era.
The decreasing level of investment
is just one factor contributing to the
long-term downturn in PE fundraising.
In addition, the massive fundraising
efforts during the boom years resulted
in a large buildup of capital that is just
beginning to work its way through the
system. As we will discuss on page 6,
there is still more than $100 billion in

Fundraising by Year
350

$300
293
$250

246

300

247

247

250

$200
$150

200

161
121 120

137

112

$100

100

$50
$0

150

50
$89

$135 $204 $266 $252 $145

$51

$100 $113

2004 2005 2006 2007 2008 2009 2010 2011 2012

Capital Raised ($B)

2007 and 2008 vintage funds.

Fundraising was relatively strong
in the first half of the year, particularly
in 2Q, but petered out in the last two
quarters. In fact, the 22 funds closed
in 4Q was the lowest quarterly total in

1H 2013 PE Fundraising and Capital Overhang Report

# of Funds Closed

Source: PitchBook

more than two years. Part of the reason

for the muted fundraising at the end
of the year may be that investors were
focused on deal-making, as we saw a
considerable spike in deal activity in 4Q
ahead of higher tax rates on January 1.

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Investors have more success closing large funds in 12

Several interesting trends emerge
when looking at fundraising by fund
size, but the most significant is the
reemergence of mega funds of $5
billion or more. Much of the uptick
in capital raised during 2012 can be
attributed to the four mega funds
closed during the year. Although four
may seem like a small number, just
one mega fund was raised in 2010 and
2011. Furthermore, the four mega
funds closed in 2012 accounted for
26% of the total capital raised during
the year.
PE firms also displayed heightened
focus on the $1 billion to $5 billion
fund size bucket, which accounted for
the largest proportion of fundraising
activity both by fund count (25%)
and capital invested (52%). PE firms

Fund Count by Fund Size

100%
$5B+

90%
80%

$1B-$5B

70%
60%

$500M-$1B

50%
40%

$250M-$500M

30%
$100M-$250M

20%
10%

Under $100M

0%
2005 2006 2007 2008 2009 2010 2011 2012

Source: PitchBook

Capital Raised by Fund Size

PE firms close
32 funds with $1B+,
the most since 2009

100%
$5B+

90%
80%

$1B-$5B

70%

raised 32 funds of $1 billion or more

in 2012, compared to 33 in 2010 and
2011 combined. Since 2010, these
funds have grown from 11% to 29%
of all PE funds raised and expanded
from 43% of capital raised to a
substantial 78% in 2012.
As investors have shifted their
focus to larger vehicles, funds on the
smaller end of the spectrum appear
to have fallen from favor. PE firms
raised just 15 vehicles of less than
$100 million in 2012, a 48% decrease
from 2011 and the lowest total in
more than a decade. Interestingly, all
of the fund size buckets of less than
$1 billion attracted less capital in 2012
than in 2011.
Part of the reason for the downtick

60%

$500M-$1B

50%
40%

$250M-$500M

30%
$100M-$250M

20%
10%

Under $100M

0%
2005 2006 2007 2008 2009 2010 2011 2012

in smaller funds is that there have

been less first-time funds able to
reach a final close, and these funds
tend to be smaller in size. There
were just ten first-time funds raised
in 2012the fewest in more than a

1H 2013 PE Fundraising and Capital Overhang Report

Source: PitchBook

decade. As LPs continue to scrutinize

their GP relationships more closely,
it should only become more difficult
for unproven firms to raise their first
fund.

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Fund sizes continue to rebound

Average Fund Size ($M)

$1,800

$1,560

$1,600
$1,290

$1,400
$927

$1,000
$800

$584

$1,200

$833

$1,019

$675

$907

$828

$600
$400

$1,162

$1,106

$1,200

$1,011

$519
$730

$550

$550
$423

$200
$0
2004

2005

2006

2007

2008

Buyout Funds

2009

2010

2011

All PE Funds

2012

Source: PitchBook

Average fund size back above $1B for first time since 09
The phenomena discussed on the
previous page can easily be seen
when looking at the average fund
sizes, which have more than doubled
since plummeting to a nadir in 2010.
For the first time since 2009, the
average size of all types of PE funds is
above $1 billion. Large funds are not
necessarily better, but the uptick in
average fund sizes is an indication that
investors are harboring more faith in
the asset class.
As we touched on in the
introduction, LPs are increasingly
looking to limit how many GP
relationships they maintain.
Additionally, large institutional LPs
need to commit relatively large sums
of capital to PE funds in order for
the strategy to play a meaningful role
in portfolios that often exceed $100
billion. To that end, the average LP

Average LP Commitment to Buyout Funds

$90

6%
5.0%

$80
$70

5%

4.3%

$60

3.5%

3.8%

3.8%

3.8%

$50

3.6%

3%

3.4%

$40

2%

$30
$20
$10

4%

1%
$35

$48

$50

$65

$69

$34

$53

$83

2005

2006

2007

2008

2009

2010

2011

2012

0%

$0

Average Commitment Size ($M)

Average Commitment/Fund Size

Source: PitchBook

commitment size to buyout funds has

more than doubled since 2010 and
now sits at $83 million. The trend
towards larger commitments bodes

1H 2013 PE Fundraising and Capital Overhang Report

well for top-performing GPs, as it will

undoubtedly lead to easier fundraising
efforts, but it may pose a challenge for
smaller firms and first-time funds.

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Time spent on the road plunges to less than a year

Average Time to Close
19.0

20
18

17.6
17.7

16
14
Months

The post-crisis difficulties in

fundraising become readily apparent
when looking at the average time to
close a fund. After dipping below 10
months in 2006, the average time to
close a fund roughly doubled over the
next four years, reaching an apex of
18 months for buyout funds and 19
months for all PE funds in 2010.
However, it appears that the
fundraising environment has been
improving in recent years. Fundraising
timelines came down slightly in 2011
and dipped below 12 months in 2012 for
the first time since 2008. Several factors
have converged to reduce fundraising
timelines, including larger commitments
from LPs and fewer first-time funds,
which typically take longer to raise.
Shorter fundraises are better for
all parties involved in PE investing,
as it allows GPs to concentrate more

15.5
11.8

12
9.7

10

11.7

8
7.6

6
4
2004

2005

2006

2007

Buyout Funds

2008

2009

2010

2011

2012

All PE Funds
Source: PitchBook

of their time and energy on sourcing

deals, nurturing portfolio companies,
and realizing investments. Looking
back over the last decade, the average

time to fundraise has gone in a cyclical

pattern. If the trend continues, PE firms
should continue to enjoy shortened
fundraising timelines in the year ahead.

Select currently open funds

Source: PitchBook

Firm
Kohlberg Kravis Roberts
Riverstone Holdings
Providence Equity Partners
Sun Capital Partners
Ripplewood Holdings
THL Credit
AEA Investors
Lionhart
Yucaipa Companies
Elevation Partners
Catterton Partners
Evercore Partners
LLR Partners
Versa Capital Management
Arsenal Capital Partners
Jefferies Capital Partners
Harbour Group

Fund
KKR North America Fund XI
Riverstone Global Energy and Power Fund V
Providence Equity Partners VII
Sun Capital Partners VI
Ripplewood Partners III
THL Credit Partners
AEA Investors Fund V
Lionhart Talon
Yucaipa American Alliance Fund III
Elevation Partners II
Catterton Partners VII
Evercore Capital Partners III
LLR Equity Partners IV
Versa Capital Fund III
Arsenal Capital Partners III
Jefferies Capital Partners V
Harbour Group Investments VI

1H 2013 PE Fundraising and Capital Overhang Report

Fund Type
Fund Target Size ($B)
Buyout
$10.00
Buyout
$7.50
Buyout
$6.00
Buyout
$4.00
Buyout
$2.50
Growth/Expansion
$2.50
Buyout
$2.00
Buyout
$2.00
Buyout
$2.00
Growth/Expansion
$1.90
Buyout
$1.50
Buyout
$1.00
Buyout
$1.00
Buyout
$0.85
Buyout
$0.83
Buyout
$0.80
Buyout
$0.75

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Dry powder dips below $350B

PE Capital Overhang

$100

$80

$600

Cumulave Overhang

$500
$71.31

Overhang by Vintage and Fund Size

$64.45

$70

$400

$60
$50

$50.59
$300

$42.78

$40
$200

$25.78

$30
$20

Cumulave Overhang ($B)

Current Overhang ($B) by Vintage

$90

$93.30

$100

$10
$0

$0
2007

2008

Under $100M

2009

$100M-$250M

2010

$250M-$500M

2011
$500M-$1B

2012
$1B-$5B

$5B+

Source: PitchBook

evaporate in the next couple of years. The need to deploy this

capital could lead to more mega deals in the near term. It is
important to note, however, that some GPs have reached out
to their LPs and been granted extended investing timelines.
The need to put capital to work has led to a variety of
changes within the PE industry, including a significant
increase in the number of secondary buyouts. With many
industry professionals reporting a relative lack of quality
opportunities, PE firms have been turning to their industry
counterparts when sourcing deals. This trend should
continue as the capital overhang remains highparticularly
in older vintagesand the company inventory continues to
expand.

By many accounts, the PE capital overhang got a bit out of

control during the run-up to the financial crisis as it grew
from $390.2 billion to $501.2 billion in just two years. Since
topping out in 2008, however, the capital overhang has come
down steadily as the disparity between capital invested and
capital raised has contracted. Now sitting at $348.2 billion, the
capital overhang is at its lowest level in more than six years.
One of the most important aspects of the capital overhang
is the large proportion of dry powder that is currently held
in 2007 and 2008 vintage funds. There is still more than $100
billion left in these vintages, which is more than the 2009 and
2010 vintages. As PE firms typically have a five-year mandate
to invest a fund, the dry powder in these vehicles should

Current Overhang by Vintage Year and Fund Size

Fund Size

2007

2008

2009

2010

2011

2012

$5B+

$18.12

$30.08

$20.38

$-

$14.20

$23.15

$1B-$5B

$14.46

$18.52

$21.21

$9.79

$35.58

$48.16

$500M-$1B

$3.34

$8.70

$4.59

$8.28

$11.81

$10.42

$250M-$500M

$4.06

$4.64

$2.83

$5.12

$5.32

$6.72

$100M-$250M

$2.23

$2.32

$1.37

$1.45

$3.88

$4.40

Under $100M

$0.57

$0.20

$0.19

$1.14

$0.52

$0.44

Source: PitchBook

1H 2013 PE Fundraising and Capital Overhang Report

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Funds

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