GPs endure marathon fundraising runs

Despite more cash for grabs, it’s still taking GPs 18 months on average to close their funds, recent research reveals.

Consistent with previous years, private fund managers still need about a year and half in market to close their funds, according to Bain & Company research. This comes despite a general uptick in the amount of capital available for commitment.

A total of $385.6 billion was raised in 2013, according to PEI’s Research and Analytics division. In 2012 the comparative figure was a considerably lower $301.1 billion while in 2011 the total was even less: $274.4 billion.

Nonetheless, “on average, fund-raising campaigns completed in 2013 lasted 18 months, placing an onerous demand on scarce GP partner time and private equity firm resources,” the report said.

The challenge for GPs on the fundraising trail was that LPs have become more discerning and willing to cut GP ties than in previous years. For instance, 45 percent of the funds that closed in 2006 and 2007 had re-up rates of 70 percent or more. The LP re-up rate has slipped steadily since then, with slightly less than 30 percent of funds that closed in 2012 and 2013 attracting similar support from LP loyalists.

Looking forward to 2014, the report said LP interest in new commitments will continue to pick up. Nonetheless, a crowded fundraising trail this year means that the ratio of the amount of capital GPs are seeking to raise to the amount they will actually manage to bring in during 2014 will be unlikely to fall much below the 2.6 to one it reached last year, the report said.

Dominating LP interest are mid-market and growth-capital funds in the US and Europe, energy funds, secondary funds and large US buyout funds (in the range of $2.5 billion to $5 billion), the report said, citing a recent survey of investor trends in 2013 and 2014 by Probitas Partners.