Private equity fundraising in 2011 is on pace to top 2010. Much of this increase is driven by middle market funds, which continue to outpace activity at the upper end of the market.
After year-over-year increase of 15.7% in the second quarter, fundraising in the third quarter of 2011 slowed as private equity funds continue to work through a capital overhang of nearly $400B. However, the $17B closed on by 27 funds in the third quarter puts 2011 on track to surpass 2010 in terms of total capital raised.
Driving the increase in fundraising are middle market private equity funds, which, as of the close of the third quarter, had raised approximately $64.5B of the $79B raised to date in 2011. This focus on middle market fundraising is consistent with data that shows middle market companies accounting for approximately 90% of deal flow through the first half of 2011.
The lag in third quarter fundraising comes at a time when the market saw an increase of funds raising capital of 14% over the second quarter. This increased competition for a diminished pool of limited partner capital means that some funds may not hit their fundraising targets as 2011 comes to an end.
The private equity fundraising data referenced above was provided by Pitchbook and is shown in the following charts (click to view).