The number of private equity funds seeking money from investors reached an all-time high in the second quarter, while those which completed fundraising hit a record low, according to data released by market research firm Preqin on Monday.
Tighter deal financing and an economic slowdown have made it more challenging for private equity fund managers to deliver outsized returns for investors, who have become more picky when it comes to tying up their money for an average of 10 years.
Some investors, such as banks, are exiting private equity altogether due to liquidity and regulatory pressure. Others are cutting the number of fund managers they tap in order to have more capital, and better terms, in their remaining funds.
Preqin said 126 private equity funds reached a final fundraising close in the second quarter, the lowest number since it started collecting data in 2004. They raised an aggregate $61.4 billion, down from $92.4 million a year ago.
As of the start of July, there was a total of 1,872 private equity funds in the fundraising market - a record high according to Preqin data - hoping to attract an aggregate $801 billion of capital.
"With the market so crowded, fund managers will have to work hard to ensure that they position their vehicles correctly and do their homework in targeting the right investors for their offering," Preqin data manager Richard Stus said in a statement.
AXA Private Equity closed the largest fund in the second quarter, with its AXA Secondary Fund V, which buys private equity investments from those wishing to exit them, attracting a total of $7.1 billion from investors, Preqin said.
The largest private equity fund in the market by target size is Warburg Pincus Private Equity XI, which is seeking $12 billion. Private equity firm Blackstone Group LP (BX.N) is close to raising a $13 billion fund in real estate.